We have partnered with Purbeck PG insurance specialist, currently the UK’s only current provider of Personal Guarantee Insurance (PGI), to provide you with a solution that gives you the confidence to grow your business through securing crucial finance, whilst protecting your personal assets.
In our latest blog, we will delve deeper into Personal Guarantee Insurance (PGI) and why it might be something you want to consider.
What is Personal Guarantee Insurance?
Personal Guarantee Insurance provides insurance coverage for an individual that has signed a Personal Guarantee on a loan.
A Personal Guarantee is a legal document, whereby the individual and the lender have come to an agreement that if the individual’s business cannot repay a loan, they will have to use their own personal assets to make repayments.
While this can be an attractive option for many businesses in the growth stage, if your business does unfortunately begin to struggle, it can become a very stressful period for business owners or for anyone who has taken on the role of a guarantor for a business.
Personal Guarantee Insurance provides for any losses incurred by the guarantor if the borrower is unable to make the repayments. In the event of default, the insurance policy will cover the outstanding amount owed, which may include interest and legal fees.
The benefits of having Personal Guarantee Insurance?
The main benefit of having Personal Guarantee insurance is to protect your personal assets and give you the confidence to grow your business from strength to strength, with the peace of mind that you’ll have a team of trusted experts to call on, should you need the additional support.
Purbeck Insurance is a specialist Personal Guarantee Insurance underwriter, authorised and regulated by the Financial Conduct Authority.
What can be covered with Purbeck?
PGI is available against a wide range of business loans, including invoice finance, asset-based loans, commercial mortgages, peer-to-peer loans, development loans and more.
- 80% cover for PGs signed in support of secured finance
- 60% cover in the first year for PGs attached to unsecured finance, rising to 70% in year two, then 80% in year three and thereafter
- A maximum level of cover of £400,000 for secured loans and £300,000 for unsecured loans
- Unlimited access to the Business Support Service which provides invaluable support during financial difficulties
- £10,000 cover for a professional debt negotiator to arrange settlement with the lender
- Cover for multiple Directors on one Policy at no extra cost if the PG is signed on a joint and several liability basis
- Cover for multiple guarantees on one Policy
PGI settlement for provider of winter sports holidays following acquisition from previous owner
The business in this case had traded since the mid-90s and provided catered winter sports holidays in Europe. The business was acquired by the new management team following the retirement of the former owners. The business was acquired via leveraged finance, utilising an £850,000 loan from an alternative finance provider and £275,000 of own funds introduced.
Shortly after acquisition, the business experienced trading difficulties and increased overhead costs as a result of Brexit and increased competition which drove prices down.
Expected increases in revenue did not materialise and the business developed working capital concerns as a result of the cyclical nature of the underlying business model, which was compounded by the revenue stagnation.
It was decided that following the acquisition in December, the business was to be placed into Administration in the following May by the appointed insolvency practitioners on the basis that it was technically insolvent and could not meet its creditor obligations.
What support did Purbeck provide?
- Pre-insolvency business advice
- Introduced for possible refinance of existing facilities and repayment holidays
- Introduced the client to a Panel Member firm for early intervention and to limit escalation of costs
- Personal Guarantee negotiator instructed to help reduce outstanding obligations under the Personal Guarantee
What were the final figures?
Original Personal Guarantee Amount – £200,000
Amount of cover provided by Policy – 80%
Final Settlement Figure Following Negotiations – £180,000
Total Claim Paid – £144,000
Total Paid Out in Fees – £2,600
Insureds Contribution – £36,000