The quest for financial support is a pivotal moment in every start-up’s journey.
For UK entrepreneurs, this venture has taken a twist.
With an uptick in personal guarantee demands for business loans, founders are at a crossroads – to pledge or not to pledge?
Recent data from Purbeck Personal Guarantee Insurance indicates a paradigm shift.
In just one year, there’s been a 46% surge in start-up founders seeking personal guarantee insurance.
The average loan amount underpinned by such guarantees remained stable at about £181,350 in 2022.
Interestingly, while 2021 saw stability, 2023 experienced a dip, with loan values averaging at £166,534.
What’s Driving This Trend?
The current financial environment for small businesses has been turbulent, to say the least.
With echoing calls for better access to financial resources, the government hasn’t remained silent.
The Treasury Committee recently initiated an inquiry into the financial accessibility landscape for small enterprises, encompassing aspects like:
- Business lending and financial innovation
- The impact of initiatives such as the Bank of England’s Term Funding Scheme
- The influence of credit reference agencies and government state aid in bolstering SME lending
But what does the ground reality look like for entrepreneurs?
For many, the act of committing to a personal guarantee is a rite of passage, an accepted risk of the trade.
Yet, for a sizeable portion, it’s an agonising decision, fraught with personal and familial ramifications.
And if one opts against this route, the spectrum of available funding avenues narrows significantly.
Empowering Entrepreneurs: Navigating the Terrain
Being caught in this conundrum isn’t the end of the road. Entrepreneurs can consider the following:
- Explore Alternatives: Research other financing avenues that may not necessitate personal guarantees
- Get Insured: If personal guarantees are inevitable, consider insurance options to minimise potential risks
- Stay Informed: Regularly review governmental policies and initiatives aimed at assisting SMEs. The landscape is ever-evolving, and knowledge is power
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.
