SMEs turn to borrowing for cashflow as 38% of loans shift away from growth
The UK’s only provider of personal guarantee insurance (PGI) to small business owners – Purbeck Insurance Services – is calling on the government to use the 26 November Budget to give small businesses the certainty and stability they urgently need. The plea comes as new data reveals firms are pulling back on investment, borrowing more to maintain cashflow, and taking on greater personal financial risk with October ’25 a record month for applications for PGI. Purbeck’s analysis shows that 38% of SME loans taken in October were purely for working capital, to sustain cashflow. This is the highest proportion the business has recorded since the start of 2025.
According to the latest Barclays Business Prosperity Index, 55% of SMEs have paused investment plans amid heightened economic uncertainty – 7% more than last year. At the same time, insolvencies are rising sharply. The Insolvency Service has reported a 16.7% year-on-year increase in business failures, with more than 2,000 companies entering liquidation in October alone.
Record levels of borrowing – and rising personal liability exposure
Analysis from Purbeck Insurance Services shows just how financially stretched the UK’s SMEs have become. Lending data for Q3 2025 reveals:
- Average SME loan value has jumped 42% year-on-year, rising to £289,827
- Loans for young businesses (≤2 years) hit a record £155,257, up 64%
A plea for stability and support
Todd Davison, managing director of Purbeck Insurance Services, said: “Small businesses are remarkably resilient, but they’re facing a perfect storm—rising costs, political uncertainty, and increasing pressure to take on more personal risk to secure finance. The Budget must give them breathing space. SMEs need stability and clarity from government to invest confidently rather than operate in survival mode.
“Our data shows loan values at record highs and 38% of personal guarantee-backed loans now used just to maintain cashflow. At the same time, insolvencies are climbing. This is not a market that can absorb further shocks. The government has an opportunity on 26 November to restore confidence and unlock billions of pounds of potential investment.”
Purbeck’s call to government
Purbeck Insurance Services is urging the chancellor to deliver:
- Long-term policy stability so businesses can plan investment
- Support for established small and mid-sized firms, not only start-ups or large corporates
- Measures to relieve cashflow pressure, helping firms reduce reliance on high-risk borrowing
- Confidence-building commitments, avoiding sudden policy reversals
- Clear incentives for investment, particularly where SMEs are ready to move if the Budget is supportive
Todd Davison added: “This is a defining moment. SMEs want to invest, innovate and grow – but they need to know the government has their back. With the right measures, the UK’s small businesses can drive recovery. Without them, we risk more business failures and further hesitation at a time when momentum is critical.”