A recent study by Purbeck Personal Guarantee Insurance shows that more than a third (34%) of small business owners have risked everything – their homes, life savings – to sign personal guarantees for business loans.
Amidst the prevailing economic uncertainty, they are fighting for survival, even if it means putting their personal assets on the line.
The Dire State of SME Finance: Needs and Challenges
2023 has seen a notable increase in the number of small businesses desperately seeking fresh financing options.
The same study reveals that half of the small business owners are exploring new ways to boost their operations financially.
However, the urgency to settle existing debts is driving a substantial 42% of them, painting a stark picture of their financial health.
A Snapshot of SME Financing Strategies in 2023
To keep their businesses afloat, owners are resorting to various financing routes.
Traditional lenders still attract 43%, while others rely on credit cards and overdrafts (28% each).
Alarmingly, in a testament to the difficult times, one in five entrepreneurs are reaching out to friends or family for help.
However, UK-based entrepreneurs are increasingly seeking finance from alternative lenders, who continue to fill the stark funding gap for small business owners.
As banks have reigned in their appetite to lend to SMEs, it is alternative lenders that have been providing innovative funding solutions that are catered to the needs – and realities – of small business owners.
Personal Guarantees: A Blessing or a Curse?
In the maze of small business financing, personal guarantees emerge as a double-edged sword.
They can offer a lifeline to businesses struggling to access funds. Yet, they can also lead to personal financial ruin if the business fails or falls upon hard times.
The key lies in adopting prudent risk management strategies. Most pertinently, businesses should seek unsecured business funding, to avoid committing to a personal guarantee in the first place!
Small businesses access unsecured, fast funding from Got Capital. As an alternative lender, Got Capital offers financing solutions specifically designed for and catered to the needs of SMEs.
