Purbeck Personal Guarantee Insurance Monitor, Q2 2025, reveals the growing burden for Directors and Owners of the UK’s Construction and Building Firms
Highlights:
- In Q2 2025, 34% of construction sector loans were for working capital compared to 54% in Q2 2024
- Investment in growth and asset purchase increased in Q2 2025
- The average personal guarantee backed loan climbs to £194,831 in Q2 2025 up 9% on Q1 2025.
July 2025: The number of personal guarantee backed loans being taken for working capital to ‘keep the lights on’ amongst SMEs in the construction industry fell in Q2 2025, suggesting these firms are improving their ability to scale rather than just survive. This is according to the latest analysis of personal guarantee insurance applications for business loans by Purbeck Insurance Services. In Q2 2025, 34% of personal guarantee backed loans in building and construction were for working capital, down from 54% in the same quarter in 2024.
In a further positive sign for the sector, new finance for investment in growth initiatives (such as taking on new people, marketing and new services) grew in Q2 2025 with 18% of loans taken for this purpose, up from 15% the previous quarter. In addition, 10% of loans were being taken for asset purchase, the highest proportion since Q1 2022.
To support this push for growth, the owners and directors of construction firms are borrowing more and typically facing a personal guarantee demand from their lender of £194,831. This is a 9% rise on Q1 2025 when the average personal guarantee demand was £179,441.
The unique analysis of personal guarantee insurance applications for business loans by Purbeck Insurance Services, reveals the growing personal risk many building and construction SME owners and directors are facing to secure funding for their business. The analysis comes as the Federation of Small Businesses highlights the impact personal guarantees are having on access to funding[i].
Todd Davison, MD of Purbeck Insurance Services said: “Our latest Personal Guarantee Insurance Monitor for Q2 2025 suggests a growing level of confidence in construction SMEs. These businesses 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.
“Purbeck Insurance Services, along with The Federation of Small Businesses, is concerned that many small firms are put off from borrowing due to a personal guarantee demand from a lender. Personal Guarantees needs to be appropriate and proportionate to the loan agreement.
“Ultimately, however, lenders have become more risk averse so personal guarantees have become a fact of life in business borrowing. It therefore remains vital that SME owners and directors in the construction sector take steps to mitigate the risks of personal guarantee backed loans, whatever route they might take for finance – including the Growth Guarantee Scheme. Personal Guarantee Insurance exists to give businesses confidence to borrow but this is just one way to reduce the risk to a director’s assets. This underlines why owners and directors of manufacturers should always seek advice from an accountant, solicitor or commercial finance broker before signing on the dotted line.”
[i] https://www.cityam.com/personal-guarantees-overuse-holding-uk-growth-back/
When securing a new personal guarantee backed loan, it is always advisable to secure personal guarantee insurance, meaning the business owners’ and directors’ personal finances won’t be at risk in the unfortunate situation of a business failure.