Industry Insight
PGI uncovered The growth of personal guarantee insurance Todd Davison Managing Director Purbeck Personal Guarantee Insurance
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ive years ago, in March 2017, Theresa May triggered Article 50 of the Lisbon Treaty, officially starting the process of the UK’s departure from the European Union. A few months later, in June to be precise, Purbeck Personal Guarantee Insurance was born. So much has happened UK wide and globally since then. That historic move, combined with the disruption caused by the pandemic and the war in Ukraine, is being felt by small businesses in supply chain disruption, skills shortages and rising fuel costs. The impact is directly affecting demand for commercial finance today and on our own growth as a business supporting SMEs’ access to finance. Since inception, we have supported more than 1,300 directors on over £180 million of personal guarantee commitments, thanks in large part to the 550 or so business introducers, including NACFB Members. What we bring to market remains unique; we are still the only insurance provider offering personal guarantee cover, but little did we know how relevant it would become in today’s challenging economic environment. Looking at our latest data, the number of applications for personal guarantee insurance to support finance agreements for working capital almost doubled from Q1 2021 to Q1 2022. In our experience, this is the main reason small businesses are securing finance. We have also seen the average loan value rise from £142,718 in Q1 2021 to £174,104 in Q1 2022. While we have supported loans ranging from £11.2 million down to £10,000 over the past five years, the average loan value is typically £250,000. The biggest proportion of applications for personal guarantee insurance are for unsecured loans, followed by secured loans, invoice finance and asset finance. 38 | NACFB
Our typical customer has a well-established business that has been trading for 14 years, they are on average 52 years of age, employ around 28 people and while we support a wide spread of sectors, we have found that the biggest proportion of customers are in the construction sector followed by manufacturing. The challenges for the building and construction market have been well documented, chief of which has been the cost of huge price rises in construction materials on fixed price contracts. However, the good news is that our latest data shows the average personal guarantee-backed loan amongst builders and contractors fell from £193,324 in Q1 2021, to £169,877 in Q2 2022. We’ve also seen demand grow from start-ups. Our data shows that 10% of directors run start-ups and we’ve supported them on £15 million of personal guarantee commitments. Applications are now back to levels we last saw at the start of 2020 with March seeing a 108% increase on March 2021. Purbeck’s journey has only just begun. We look forward to working with NACFB Members to support their small business customers for many years to come.
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The biggest proportion of applications for personal guarantee insurance are for unsecured loans, followed by secured loans, invoice finance and asset finance
