28% of Personal Guarantee Backed Finance is used for growth in SME construction signalling hope amidst market uncertainty 

28% of Personal Guarantee Backed Finance is used for growth in SME construction signalling hope amidst market uncertainty 

Purbeck Personal Guarantee Insurance Monitor Q1 2025       

April 2025:  Nearly a third (28%) of personal guarantee backed loans in the construction sector were for growth and development in Q1 2025, signalling cautious optimism. This is according to business loan data collected by Purbeck Insurance Services, the UK’s only provider of personal guarantee insurance (PGI) to SME owners and directors.

The first quarter of 2025 also saw a notable rise in the number of personal guarantee backed loan applications by constructions firms, up 14% on the same quarter in 2024.  The average value of loans being secured (and therefore the level of protection they needed from personal guarantee insurance) was also up 10%, from £162,076 in Q1 2024 to £179,348 in Q1 2025.

Fewer loans to secure working capital

In a further sign of optimism, there was a 22% drop in the number of loans secured for working capital compared to the end of 2024. 38% of loans were for working capital, to keep a business running in Q1 2025 compared to nearly half (49%) of loans secured during Q4 2024.

Unsecured loans remain popular as Government boosts Growth Guarantee Scheme

Unsecured loans, where businesses don’t need to pledge assets like property or equipment to the lender, made up 51% of applications, making them the most common type of funding for construction firms.

Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “It is positive to see that the number of loans for working capital have fallen while funding for growth has increased.  It will be interesting to see if this trend continues into the next quarter as construction firms report paying higher prices for raw materials, energy and transport. Add to this the National Insurance Contribution (NIC) changes coming into effect this month, and the rise in the minimum wage, all adding to the cost of running a small building or construction business.

“Whether personal guarantee backed loans are secured for business boom or to avoid a potential bust, the key fact to remember is that directors must continue to borrow safely and to protect their personal assets when signing a personal guarantee for a loan.

“As the Government injects an extra £20 billion into the Growth Guarantee Scheme, more construction firms may apply for this potential funding avenue. It is essential that borrowers understand that lenders have to exhaust their usual recovery procedures, including the full personal guarantee, before they can claim on the Government Guarantee provided. So, using insurance to mitigate the risk of personal guarantee backed loans remains necessary.”

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