New research has revealed the scale of personal risk facing the UK’s entrepreneurs. One in three SME loans has a personal guarantee (PG) in place. With 36% of these loans for working capital to keep the business afloat, Chancellor Rachel Reeves is being urged to avoid any further measures that would raise operating costs and increase the burden on owners who have pledged personal assets as security.

Small business owners are also facing larger risks than ever before. In particular, early-stage firms, face the steepest Personal Guarantee requirements relative to their resources.

The research commissioned by Purbeck Insurance Services, the UK’s only provider of personal guarantee insurance, shows that the average personal guarantee-backed loan now stands at nearly £180,000, up 16% year-on-year.

In young businesses under two years old, the average loan value has risen 52% to £165k in the past year.

With 5.5 million SMEs forming the backbone of the UK economy, employing 16.6 million people and generating £2.8 trillion in turnover, the findings underline the need for greater awareness and protection when directors sign personal guarantees.

A Growing Risk to Growth

The Federation of Small Businesses (FSB) has warned that harsh personal guarantee requirements are stifling growth ambitions, as many firms decline finance opportunities for fear of personal loss . However, post-COVID lending patterns have only deepened the requirement for PGs, with challenger banks and non-bank lenders more likely to require PGs as standard practice.

The Role of Personal Guarantee Insurance (PGI)

Purbeck, the UK’s only specialist provider of Personal Guarantee Insurance, has seen record demand as business owners seek to mitigate these risks. PGI protects directors if a lender calls in their guarantee, safeguarding their personal assets while allowing them to access the finance needed to grow.

Todd Davison, Managing Director of Purbeck Insurance Services, said:

“Personal guarantees are now a structural feature of SME lending. When a loan is primarily to keep a business ticking over, the director who has given that guarantee faces heightened risk—especially as the cost of doing business continues to rise. Chancellor Rachel Reeves has a clear responsibility to protect the nation’s entrepreneurs."

“Personal guarantees can also hold back investment and confidence. In some cases, firms opt for more expensive funding rather than sign a PG."

“Personal Guarantee Insurance (PGI) offers peace of mind, enabling SMEs to borrow for growth without putting everything on the line. Just as many people take out life and buildings insurance when securing a mortgage, PGI applies the same principle to business borrowing—protecting personal assets if the worst happens. It’s not the only way to reduce risk, which is why seeking professional advice before accepting or rejecting a PG is essential.”

Call for Action

The UK Government has pledged to help businesses better understand personal guarantees. Purbeck Insurance Services calls for:

• Clear, practical education for SMEs on PG risks and alternatives.

• Fair and proportionate PG requirements from lenders.

• Plain-language disclosures so directors fully understand their obligations.

• Mainstream awareness of PGI as a legitimate protective option.