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SME owners reluctant to personally guarantee business loans, study reveals

More than one in 10 small business owners say they’ve decided not to take a corporate loan because it included a personal guarantee, a new report has revealed.

The finding forms part of new research published by Purbeck Insurance Services.

The study, which looks into finance options available to small businesses ahead of Brexit, shows that the majority of businesses are reluctant to use personal assets, such as their property, to secure finance.

The poll of 500 business owners and directors found that 29 per cent of respondents instead use their banking overdraft facility, while some 49 per cent have never taken any finance at all.

Meanwhile, 16 per cent have taken out an unsecured business loan, 10 per cent have taken a commercial mortgage, nine per cent have used asset finance, and eight per cent have used invoice finance.

Commenting on the study, Todd Davison, director of Purbeck Insurance Services, said: “Our findings suggest that many small business owners could be looking at external finance for the first time in readiness for Brexit. It’s important they seek independent advice and consider Personal Guarantee backed finance as part of their options as they can seriously reduce the risk of these types of loans.

“As well as taking Personal Guarantee Insurance, they can also share a Personal Guarantee with fellow directors of the business, and negotiate which part of the loan is covered.”

The research comes after the launch of the new SME Finance Charter, which aims to improve finance availability for small and medium-sized enterprises. Under the commitment, members, including HSBC, Lloyds and Santander, have pledged to support SME customers beyond Brexit proceedings by launching new sources of finance and working together to help SMEs secure the investment capital they require.

If you need help and advice raising capital for your small business, please get in touch with our expert team.

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John Morgan

John Morgan

Senior Associate – Corporate / Commercial at Mander Hadley Solicitors
A law graduate of Warwick University, I trained and qualified as a solicitor in London in 1977 before spending several years in the Middle East where I acted on major corporate, commercial and banking transactions, many with an international aspect.

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