Q2 2025 Sees Drop in SME Survival Loans as Personal Guarantee Exposure Approaches £200k

SMEs Shift Focus from Survival to Growth, Reveals Purbeck’s Personal Guarantee Insurance Monitor

Key Takeaways:

• 24% drop in working capital loans compared to Q1 2025

• 53% annual increase in refinancing deals

• 38% year-on-year rise in growth-focused investments

• Average loan value climbs to £194,499

UK small and medium-sized enterprises (SMEs) appear to be entering a more stable and growth-focused phase, as outlined in the latest Q2 2025 analysis from Purbeck Insurance Services. The report, which examines trends in personal guarantee insurance for business borrowing, reveals that 24% fewer SMEs sought funding purely to maintain operations compared to Q1 2025.

The number of businesses relying on personal guarantee-backed finance to ‘keep the lights on’ has now reached its lowest level since Q3 2024, based on Purbeck’s tracking.

At the same time, the volume of refinancing deals has seen a robust 53.6% increase year-on-year. This surge indicates improving access to funding across various lending channels — including high street banks, alternative finance providers, and fintech platforms — supported by ongoing government initiatives. However, the total lending activity remains below the levels seen before the COVID-19 pandemic.

Encouragingly, SMEs are also demonstrating a renewed appetite for expansion. Investment in growth initiatives rose by 38% compared to the same period last year, while applications for loans supported by personal guarantees to purchase business assets increased by 9.7%.

45% of loans were unsecured in Q2 2025, making them the most popular form of funding, followed by secured loans (16%).

To support this push for growth, SME owners and directors are borrowing more and typically facing a personal guarantee demand from their lender of £194,499. This is a 6.4% rise on Q1 2025 when the average personal guarantee demand was £182,804.
Edging close to the £200k mark, the unique analysis of personal guarantee insurance applications for business loans by Purbeck Insurance Services, reveals the growing personal risk many SME owners and directors are facing to secure funding for their business.

A year-on-year rise in the volume of SME owners and directors seeking insurance to reduce the risk of personal guarantees for business loans shows that many are taking action to mitigate that risk. Applications for personal guarantee insurance (PGI) grew by +3.2% year on year and June 2025 was a record month with for PGI applications, up 17.8% on June 2024.

Todd Davison, MD of Purbeck Insurance Services said: “Our latest Personal Guarantee Insurance Monitor for Q2 2025 suggests a growing level of confidence in UK SMEs, echoing the findings of the latest Lloyds Bank Business Barometer . SMEs are shopping around for better finance deals and pursuing their growth ambitions. But this comes at a cost with a higher level of borrowing and a higher level of personal guarantee risk, commensurate to that borrowing. With business insolvencies rising it is vital SME owners and directors take steps to mitigate the risks of personal guarantee backed loans, whatever route they might take for finance – including the Growth Guarantee Scheme.”