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A number of small and medium-sized enterprises (SMEs) have expressed concern that they will be unable to access government loans once the furlough scheme ends in October.
In new analysis published by Purbeck Insurance Services, which provides personal guarantee insurance, the firm suggests there will be a rise in demand for SEM loans to help pay staff wages when the government-backed furlough scheme comes to a close.
“Lending to SMEs is going to be much more risk averse than they were prior to the pandemic,” said Todd Davison, managing director of Purbeck Insurance Services.
“It is likely that new finance will be heavily dependent on a business owner’s willingness to sign a personal guarantee – effectively putting their personal assets on the line if the business fails. After months of worry and uncertainty this is not what small businesses need.”
“It is crucial firms seek expert advice regarding business loans from members of respected trade bodies such as NACFB or FIBA, and investigate ways to mitigate the risks such as using personal guarantee insurance.”
He added that there are a number of steps which can be taken by SME owners to ensure that they are able to continue operations after the furlough scheme ends.
These include educating themselves about risks, seeking legal and/or financial support, sharing the personal guarantee with another director, and negotiating a time limit and cap on the amount covered by the personal guarantee.
Authors: Oliver Murphy & Sacha Bright
Disclaimer
To the best of our knowledge, the information we have provided is correct at the time of publishing. Sacha Bright is not a solicitor or accountant and we recommend that you seek professional advice on any topic discussed.
Tagged: sme entrepreneur alternative finance
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