Construction strength offsets manufacturing slowdown
New analysis of small business loan activity in Q4 2025 shows overall demand for funding levelling off despite diverging trends in construction and manufacturing. This is according to Purbeck Insurances Services latest data on personal guarantee insurance (PGI) applications. Directors/Managers of small businesses typically apply for Personal Guarantee Insurance when securing new personal guarantee backed funding for their business.
Borrowing behaviour remains defensive
Borrowing behaviour also remained defensive. Working capital to support cashflow continued to be the dominant reason for finance in Q4 2025, with 37% of all loan applications for this purpose, up from 33% a year earlier in Q4 2024, while applications linked to growth and expansion eased slightly.
Average loan value up 22%
The average personal guarantee demand is now £185,000 (based on the level of insurance cover taken) against an average loan of £269,732 in Q4 2025. This loan value has risen 22% on Q4 2024, reflecting inflationary pressures and higher operating costs across the economy.
Construction up, manufacturing down
While the number of applications for personal guarantee insurance in Q4 2025 remained almost level with the previous quarter, dipping by just 0.1%, construction applications jumped 10.7% between Q3 and Q4 2025 reflecting ongoing demand for finance linked to contracts and project delivery. In contrast demand for funding and PGI from manufacturing firms fell by 25.3% over the same period, underlining continued caution around capital investment in the sector.
Looking at the full year, total applications for personal guarantee backed loans and PGI across 2025 were higher than in 2024 overall, although growth was weighted towards the earlier part of the year.
Many SMEs are prioritising working capital and cashflow support over growth-led borrowing. That reflects a pragmatic approach as businesses manage higher costs and economic uncertainty. That said, there are signs of growing ambition beneath the surface based on recent research from Novuna Business Finance. So while our own data indicates that, as businesses move into 2026, the focus remains on stability and cashflow in the near term - this could begin to shift as confidence improves and funding conditions ease, despite ongoing concerns around borrowing costs.
UK Government advice highlighting Personal Guarantee Insurance
For the first time, the UK Government has suggested business owners consider Personal Guarantee Insurance (PGI) as a way of protecting themselves when accessing finance. Purbeck Insurance Services. the UK's only specialist provider of Personal Guarantee Insurance, says the guidance reflects the growing exposure faced by small business owners, particularly at a time when access to finance increasingly comes with personal risk attached.
The advisory, published by The Insolvency Service, outlines the risks associated with signing a personal guarantee (PG) and explicitly highlights the availability of personal guarantee insurance to help safeguard directors' personal assets if a guarantee is called in.
We welcome this new UK Government guidance encouraging business owners to better understand personal guarantees and to utilise personal guarantee insurance. One in three SME loans today has a personal guarantee in place, and worryingly, 36% of those loans are taken out simply to provide working capital to keep the business afloat Small business owners are being asked to shoulder greater personal risk than ever before.
Early-stage firms, in particular, face the steepest personal guarantee requirements relative to their resources, often putting their homes, savings and personal finances on the line just to secure funding. Personal Guarantee Insurance exists to protect directors if a lender calls in their guarantee, safeguarding personal assets while still allowing entrepreneurs to access the finance they need to survive and grow.
Personal guarantees are legally binding commitments that make directors personally liable for business debts if their company cannot meet its obligations. They are commonly required by lenders, landlords and suppliers, especially where businesses have limited trading history, weaker credit profiles or are seeking larger sums of finance.
The UK Government's decision to reference personal guarantee insurance marks an important step in improving understanding and transparency around PGs.
This is a clear signal of the Government's pledge to help businesses better understand personal guarantees. By boosting mainstream awareness of Personal Guarantee Insurance as a legitimate and responsible protective option, business owners can make more informed decisions and manage risk with greater confidence.
Personal Guarantee Insurance provides directors with financial protection if a lender enforces a personal guarantee, helping to cover the guaranteed amount and reduce the impact on personal assets, while supporting continued access to vital business finance.
For more information please visit Purbeck Insurance Services
