ALMOST half (49 per cent) of small businesses in the UK have never accessed business finance, business loans or SME finance.
However, according to new research from insurance company Purbeck, 29 per cent of business owners have admitted to using their overdraft facility to fund their business. 16 per cent of small business owners have taken an unsecured business loan to free up cash for their company, while 10.4 per cent used a commercial mortgage.
Just nine per cent told Purbeck that they had used asset finance, while 7.6 per cent used invoice financing. 5.2 per cent said that they had used another type of loan secured by debenture or charge.
Purbeck offers personal guarantee insurance for small business owners, and recently revealed that demand for personal guarantee insurance on peer-to-peer business loans rose by 40 per cent in the first six months of 2019, compared to the previous six-month period.
The insurer has suggested that Brexit uncertainty and no-deal preparations could inspire more small businesses to consider external financing for the first time.
“Our findings suggest that many small business owners could be looking at external finance for the first time in readiness for Brexit,” said Todd Davison, director of Purbeck Insurance Services.
“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.”
Purbeck has advised small business owners to always educate themselves on the risks of external financing, and to understand the parameters of personal guarantee insurance, as well as a cap on the amount to be covered, and a time limit on the coverage.
