Business loans to ‘Keep the Lights On’ fall in Q2 2025
SMEs are improving their ability to scale rather than just survive, according to the latest analysis of personal guarantee insurance applications for business loans by Purbeck Insurance Services. In Q2 2025, 24% fewer small and medium sized businesses needed personal guarantee backed finance for working capital, ‘to keep the lights on’ than in the previous quarter. The number of SMEs needing finance to keep their business on an even keel has not been this low since Q3 2024, based on Purbeck’s data.
In contrast, refinancing deals grew dramatically year on year by 53.6% as momentum in SME lending builds – driven by big banks, challengers, fintechs, and government support. However, lending volumes are still not back to pre-pandemic levels.
In a further positive sign, investment in growth initiatives also grew year on year by 38% and SMEs are spending more on assets with a 9.7% increase in applications for personal guarantee backed finance to buy an asset.
45% of loans were unsecured in Q2 2025, making them the most popular form of funding, followed by secured loans (16%).
To support this push for growth, SME owners and directors are borrowing more and typically facing a personal guarantee demand from their lender of £194,499. This is a 6.4% rise on Q1 2025 when the average personal guarantee demand was £182,804.
Edging close to the £200k mark, the unique analysis of personal guarantee insurance applications for business loans by Purbeck Insurance Services, reveals the growing personal risk many SME owners and directors are facing to secure funding for their business.
A year-on-year rise in the volume of SME owners and directors seeking insurance to reduce the risk of personal guarantees for business loans shows that many are taking action to mitigate that risk. Applications for personal guarantee insurance (PGI) grew by +3.2% year on year and June 2025 was a record month with for PGI applications, up 17.8% on June 2024.
Todd Davison, MD of Purbeck Insurance Services said: “Our latest Personal Guarantee Insurance Monitor for Q2 2025 suggests a growing level of confidence in UK SMEs, echoing the findings of the latest Lloyds Bank Business Barometer. SMEs are shopping around for better finance deals and pursuing their growth ambitions. But this comes at a cost with a higher level of borrowing and a higher level of personal guarantee risk, commensurate to that borrowing. With business insolvencies rising it is vital SME owners and directors take steps to mitigate the risks of personal guarantee backed loans, whatever route they might take for finance – including the Growth Guarantee Scheme.”