The Federation of Small Businesses warns that heavy-handed personal guarantees are restricting ambition and hindering economic growth. Research indicates that 60% of limited company directors would pursue business loans without risking personal assets. However, 78% of directors seeking finance face demands for personal guarantees, prompting 24% to decline funding. Many who accept guarantees modify their business strategies to minimize risk. The FSB is urging the government to regulate personal guarantees, as unaddressed, they threaten to suppress entrepreneurial ventures and stifle innovation.
"In December 2023, FSB used its historic super-complainant status on behalf of UK small business customers to call for action on personal guarantees."
"The practice is now widespread, with 78 percent of directors who applied for finance being asked for a personal guarantee."
"Without action, would-be entrepreneurs could be deterred from starting up, with personal risk outweighing ambition and ideas left unrealised."
"For those small business owners who were prepared to undertake a personal guarantee, 14 percent said it made them run their business more cautiously, curbing their appetite for risk until the loan was paid off."
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