Small businesses use borrowing to shore up cashflow in Q4 2025
New analysis of small business loan activity in Q4 2025 shows overall demand for funding levelling off despite diverging trends in construction and manufacturing. This is according to Purbeck Insurance Services’ latest data on personal guarantee insurance (PGI) applications. Directors/managers of small businesses typically apply for Personal Guarantee Insurance when securing new personal guarantee backed funding for their business.
Borrowing behaviour remains defensive
Borrowing behaviour also remained defensive. Working capital to support cashflow continued to be the dominant reason for finance in Q4 2025, with 37% of all loan applications for this purpose, up from 33% a year earlier in Q4 2024, while applications linked to growth and expansion eased slightly.
Average loan value up 22%
The average personal guarantee demand is now £185,000 (based on the level of insurance cover taken) against an average loan of £269,732 in Q4 2025. This loan value has risen 22% on Q4 2024, reflecting inflationary pressures and higher operating costs across the economy.
Construction up, Manufacturing down
While the number of applications for personal guarantee insurance in Q4 2025 remained almost level with the previous quarter, dipping by just 0.1%, construction applications jumped 10.7% between Q3 and Q4 2025 reflecting ongoing demand for finance linked to contracts and project delivery. In contrast demand for funding and PGI from manufacturing firms fell by 25.3% over the same period, underlining continued caution around capital investment in the sector.
Looking at the full year, total applications for personal guarantee backed loans and PGI across 2025 were higher than in 2024 overall, although growth was weighted towards the earlier part of the year.
Todd Davison, managing director of Purbeck Insurance Services, commented: “Many SMEs are prioritising working capital and cashflow support over growth-led borrowing. That reflects a pragmatic approach as businesses manage higher costs and economic uncertainty. That said, there are signs of growing ambition beneath the surface based on recent research from Novuna Business Finance. So while our own data indicates that, as businesses move into 2026, the focus remains on stability and cashflow in the near term – this could begin to shift as confidence improves and funding conditions ease, despite ongoing concerns around borrowing costs.-