What starting a business in a working capital crisis has taught me
I started Purbeck [1] in 2016, working on the idea outside of long hours in Deloitte's M&A team, until I reached a point where I had to make a choice: leave it as a pipe dream, or commit to it entirely and give it the best chance of getting off the ground. I chose to commit. It was a big risk, but it was the right time in my life to take it. Ten years on, watching our own data on the businesses we insure, I'm reminded weekly that every founder faces some version of that same decision - and that the environment they're making it in right now is tougher than it's been in some time.
Our latest data, drawn from applications for personal guarantee insurance across the UK, gives an unusually direct window into what's actually happening inside small businesses right now - because a personal guarantee is a moment of real financial exposure. It's a director putting their home and personal assets behind a business loan. The trends in who is signing them, and why, tell a story about the state of small business borrowing in 2026.
The numbers behind the borrowing
Applications for personal guarantee-backed finance rose 63% year-on-year in Q2 2026, and the average loan value exceeded £300,000 for the second consecutive quarter, reaching £317,000. Working capital - the day-to-day funding needed simply to keep a business trading - accounted for 36.2% of all applications, and working capital borrowing has almost doubled in two years. That trend lines up with wider economic data: 40% of trading businesses reported rising input costs in April 2026, the highest proportion since December 2022.
What struck me most this quarter was the shift at the start-up end of the market. For the first time in over a year, new businesses under two years old are borrowing more on average than established ones with loans averaging at £345,000. Start-ups don't have the track record, customer base or assets that give lenders confidence, so a director in that position is carrying an extraordinary level of personal risk at the earliest and most fragile stage of building something.
Encouragingly, borrowing isn't only defensive. Growth-focused finance still accounted for 20% of applications, and asset purchase, development and acquisition together made up nearly a quarter of all lending.
Property development and construction remains our largest sector by volume with 17% of all applications in Q2 coming from directors of these firms, more than double the level seen in the same quarter last year. Working capital was again, the leading driver. And we're seeing a genuinely positive shift in who is borrowing. Applications from female directors grew 77% year-on-year in H1 2026, outpacing the 64% growth seen across the market as a whole, even though female-led businesses still represent a small minority of applications overall.
What this means if you're starting out
If you're building a business in this environment, a few things from our experience - both running Purbeck and watching thousands of founders navigate personal guarantees - are worth considering.
Have a well-defined mission and long-term goals that guide your decision-making, especially when short-term pressure tempts you into decisions that drift from why you started. Don't be afraid to pivot or experiment. Lean startup principles exist for a reason: build what you can prove customers actually want, rather than what you assume they'll want, and you waste far less time and capital finding out you were wrong.
Track your KPIs religiously. A dashboard you actually look at, showing real-time performance rather than a monthly retrospective, is what lets you catch a problem while it's still small enough to fix cheaply. And build a culture deliberately, not by accident - define your values early, and use them in hiring, onboarding and performance reviews, so the people around you become genuine brand ambassadors rather than just employees.
Obsess over customer feedback and iterate quickly. It's the cheapest form of market research available to you, and it's free.
On the money itself
Manage your financial planning with the same rigour. Use monthly or quarterly forecasts so you can stay agile and reallocate resources quickly when conditions shift - and given how fast conditions have been shifting in 2026, that agility matters more than usual. Model best-case, worst-case and expected scenarios, so uncertainty doesn't catch you flat-footed. And manage cash flow tightly enough that you can see funding requirements coming before they become emergencies.
If you do end up signing a personal guarantee to secure business finance - and for most founders raising debt, that's simply how lending works - think about how to mitigate the personal risk you're taking on. Personal guarantee insurance is one route. It's also worth knowing that a guarantee can sometimes be shared among co-directors, or structured so only part of the loan is guaranteed, rather than one person carrying all of it.
None of this removes the risk of starting a business. It shouldn't - that risk is part of what makes building something worthwhile. But there's a difference between the risk you take on knowingly, having planned for it, and the risk that simply happens to you because you didn't look at it closely enough. If you have a plan, be bold and go for it. Believe in your convictions, get out of your comfort zone - but go in with your eyes open about what you're personally putting on the line, and take sensible steps to protect it.