Your home on the line: small business owners take bigger risks to survive

More UK business owners are putting everything on the line just to keep going. With lenders tightening terms and costs rising, personal guarantees have become a standard condition for borrowing, not a last resort. That means homes, savings and financial security are increasingly tied to business survival. For many, it’s the only way to access funding—but the risks have never been higher.

More business owners are taking on personal risk to keep trading or to grow. The UK is seeing a record surge in business owners signing personal guarantees (PGs) to secure loans. Average loans have jumped to £330,000, and nearly half of all applications involve unsecured lending with no business assets to fall back on. Construction and manufacturing firms are leading the surge.

Applications for Personal Guarantee Insurance (PGI), gives an idea of how many directors are taking on PG‑backed loans. Those jumped by two thirds in the first quarter of this year according to Purbeck Insurance Services, the highest rise ever recorded. Cashflow pressures are driving the demand for unsecured finance and while growth‑focused borrowing is at a record high (20%) and shows confidence, this is leaving business owners exposed.

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Banks and alternative lenders are demanding more security. Nearly half (49%) of all PG insurance applications relate to unsecured loans, meaning the personal guarantee is the only security the lender holds. 35% of borrowing is now for working capital, simply keeping the lights on, paying wages, and covering rising energy and input costs.

However, a significant fifth of borrowing is for growth, and that’s the highest level ever recorded. Many owners see opportunities but can’t get the finance without putting their homes on the line.

Construction and manufacturing sectors are hit hard by inflation, supply‑chain issues and delayed payments. That drove PG‑backed borrowing by 87% and 136% respectively in Q1 2026.

One in three small business loans now requires a personal guarantee, making PGs a normalised part of small‑business finance rather than a last resort. The average personal guarantee value has risen to £210,350, and the average loan to £330,200, both sharply up on last year. If the business fails, the director is personally liable for the debt.

A PG typically puts the owner’s home, savings, and personal assets at risk. PGs are central to how small businesses borrow, because if they don’t sign on the dotted line, they don’t get the much-needed funding. But many business owners don’t take on board the full implications of what they’re signing up to, and don’t realise that it they fail to keep up repayments they could lose their homes. On the other side of the coin, small business owners who do read all the small print may decide not to borrow after all. The Federation of Small Businesses warns that harsh PG requirements are deterring SMEs from taking on growth capital, limiting investment and slowing the economic growth the Government wants and needs.

Record demand for PG insurance shows owners are increasingly aware of the risk and looking for insurance to protect themselves if lenders call in the guarantee.

There is no official national statistic on how many business owners have lost their homes specifically due to personal guarantees. Lenders don’t publish repossession data broken down by cause. However the risk is real and rising. Purbeck Insurance repeatedly warns that if a business defaults, the director is personally liable, and their home can be repossessed if they cannot repay the debt. The number of owners exposed to losing their homes is higher than at any point on record. Early‑stage businesses are especially vulnerable. Among firms under two years old, PG‑backed loan values have surged 52%, meaning newer founders, with less stable cashflow, are taking on more personal risk.

Purbeck and the FSB both report that PGs are increasingly being used to cover working‑capital shortfalls, not just growth. When PGs are used to “keep the business ticking over,” the risk of default, and therefore repossession, is significantly higher.

More business owners are taking on personal guarantees because lenders are tightening criteria, costs are rising, and many small businesses have no other way to get finance. The impact is significant: higher personal risk, more stress, and greater exposure of homes and savings. Although no official figure exists for how many owners have lost their homes, the data shows that the number at risk is at a record high, and the trend is accelerating. If you do decide to go down the personal guarantee route to funding your business, don’t risk your shirt. Back yourself with insurance.