SME Finance Taskforce omits major barrier to finance – the personal guarantee

Welcoming the findings and recommendations of the SME Finance Taskforce Smart Data to Unlock SME Lending Report,  Todd Davison, MD of Purbeck Personal Guarantee Insurance says:

“We applaud the actions proposed by the SME Finance Taskforce to get credit to businesses that need it by addressing the issues and barriers within the SME lending market.  However there is one big barrier that fails to appear in the report – the personal guarantee.

“The SME Finance Taskforce has identified in the report that around 250,000 SMEs have been in the market for a bank loan or private lending over the last three years (based on British Business Bank survey).  Most of these businesses would have faced a personal guarantee request and some would have walked away from that loan for that reason.  We know from our own research that 60% of small business owners are not confident about the risks of personal guarantees and 13% of small business owners have backed out of a loan due to the demand for a personal guarantee, impacting their ability to secure the finance they need for their business.

“The Financial Conduct Authority is currently investigating the use of personal guarantees in small business lending. We await the outcome of their investigations. In the meantime it remains vital that business owners understand the risks of signing a personal guarantee and how to mitigate them such as sharing the guarantee with co-director and through personal guarantee insurance for example.  We therefore urge the SME Finance Taskforce to boost awareness of the pros and cons of personal guarantees so that they are not a barrier to growth and innovation.”