By Legal Futures Associate Purbeck Insurance Services
Solicitors could be seeing an increase in demand for SME finance based services in 2022 as the Government’s COVID-19 support has eased back and take up of the Recovery Loan Scheme is expected to remain low. As many finance deals are expected to be dependent on the business owner or director signing a personal guarantee as security, Purbeck Personal Guarantee Insurance, the UK’s only provider of personal guarantee insurance, is urging solicitors firms to make their SME clients aware that insurance exists to mitigate the risk to their personal assets, should their firm fail.
Personal Guarantee Insurance is currently distributed in the main by finance brokers and direct to SMEs. However, any solicitor appointed to advise an SME on business finance related services such as the provision of independent legal advice to personal guarantors, needs to make their Client aware of this protection, as a professional duty of care.
It can cover one or several guarantors for a business loan. Up until recently there was very little protection for business owners and directors if a Personal Guarantee backed loan was called in. Considering company insolvencies are expected to rise in 2022, the loss of savings and personal assets could be a grim reality for many business owners in the next year.
Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “Awareness of Personal Guarantee Insurance is increasing so Solicitors may wish to familiarise themselves with this product and put themselves in a positon to highlight its existence, thereby helping to ensure they are meeting their duty of care to their clients. At the same time, it will help to give their small business clients the confidence to take on a loan without significant risk to their personal assets.”
In a sign of the increasing uptake of personal guarantee backed business loans amongst small business owners, and a corresponding need to mitigate the personal financial risks of these loans, Purbeck Personal Guarantee Insurance, saw policy numbers increase year on year by 143% in October 2021, making it a record month for the business.
Todd Davison continues: “Small businesses are facing a limited choice of options from lenders, outside of personal guarantee backed loans – this is even with a strong trading position. But while business owners may have little choice over signing a personal guarantee if they need access to cash, personal guarantee insurance can provide a solution to this common business dilemma.”