63% Rise in Loan Applications in 2024
Purbeck Personal Guarantee Insurance Monitor Q4 2024
January 2025: Small and medium sized construction firms are boosting their financial resilience through the increasing use of personal guarantee backed loans and invoice financing. This is based on the latest analysis from Purbeck Insurance Services – the UK’s only provider of personal guarantee insurance.
63% more SME construction firms applied for personal guarantee backed finance in 2024 compared to the previous year. This is where the owner/director puts their personal assets up as security for the loan and uses insurance to mitigate that risk. In Q4 2024 alone, there was a 46% increase on the same quarter in 2023.
1 in 4 uses Invoice Finance
There was also a notable rise in construction firms using invoice finance in Q4 2024 – 24% of applications were for this type of financing compared to 7% in the same quarter of 2023. Invoice finance is when the lender uses unpaid invoices as collateral for funding, giving construction firms a percentage of the value of those invoices. It is often used as a fast solution when other lending products fail to offer the amount of funding needed.
Half need funds to sustain the business
Just under half (49%) of the SME construction firms taking on a new loan, were doing so to provide working capital for the business. This is considerably higher than other business sectors where, on average 34% of loans are used for this reason. It is also an increase on the same quarter of 2023 when 42% of construction firms were accessing finance for this reason.
Loan values grow
The value of loan commitments is also growing. 69% of personal guarantee backed loans were for loans of £250,000 or less, compared to 66% in 2023.
Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “Small to medium sized construction industry firms are facing increasing costs following the Budget in October 2024 and concerns have been raised about the impact of changes to Business Property Relief on the many family businesses in construction. However, it is evident that finances are already under immense pressure given the number of loans being taken for working capital and the rise in those using invoice finance as a fast route to funding. With promises of a building boom, it is vital that firms take positive steps to improve their financial resilience so that they can stay the course. One way is to use insurance to mitigate some of the risks associated with personal guarantee backed loans. By using this tool, an increasing number of SME construction firms are gaining access to the finance they need without exposing themselves to additional risk.”
