The credit card catch that puts directors’ homes at risk
Flexible finance, including small business credit cards, remains the most frequently used type of borrowing among UK SMEs, according to the British Business Bank. Yet Purbeck Insurance Services warns that most directors sign up for this everyday form of finance without realising it carries exactly the same personal risk as a six-figure business loan.
The warning comes as creditors’ voluntary liquidations (CVLs) rose almost 9% in July 2026 compared with June, according to the latest Insolvency Service figures. Purbeck says many directors are only discovering the true extent of their personal financial exposure once it’s too late.
The majority of small business credit cards require a personal guarantee as standard, meaning the director — not just the company — is on the hook if the business can’t pay. Purbeck’s own casework shows many directors sign the application without registering the clause, assuming their limited company status protects them the way it does for other business debts.
Todd Davison, managing director of Purbeck Insurance Services, said: “The 9% rise in creditors’ voluntary liquidations in July, from June, is concerning – every CVL is a director who has reached the end of the road and taken the very difficult decision to close down their business. In most cases, the cost of doing business has just become too much, and that decision will ripple through their lives, the people they employ and the communities in which they operate.
“A CVL can also make the director personally liable for any debt their business may owe, if they have given personal guarantees to secure finance, lease premises, or keep suppliers on side while trying to keep the business trading. Insolvency wipes out the company’s liability, not the director’s – and that includes the personal guarantee behind a business credit card.
“This correlates with our own experience helping directors navigate their PG obligations following CVLs. We know from our data that most loans taken out by small businesses right now are simply to ‘keep the lights on’. These figures are a timely reminder for any director relying on personal guarantees – however small they may seem at the time – to understand exactly what they’ve signed up to, and to consider whether that risk is protected.”
The exposure goes well beyond credit cards
Purbeck’s own data for Quarter 2 2026 shows the scale of personally-guaranteed exposure growing across the board. Applications for personal guarantee-backed finance rose 63% year-on-year, with the average loan value exceeding £300,000 for the second consecutive quarter, at £317,000. Working capital – the day-to-day funding needed to keep a business trading – now accounts for 36.2% of all applications, and has almost doubled in two years.
For the first time in over a year, start-ups are borrowing more than established businesses, with the average start-up loan reaching £345,000 – directors putting their homes on the line before their business has built any track record or financial cushion.