Launching and running your own small business can be an incredible experience if it’s successful. However, it can carry with it a level of risk, especially when trying to secure a loan or other forms of financing for the growth of the company. When contracting with small businesses, lenders will often ask for a personal guarantee. While this can be crucial to securing funds, it also leads individuals to take upon themselves considerable personal risk. To overcome this issue, personal guarantee insurance comes into force to help small business owners.
This article will help you gain insights into the benefits of personal guarantee insurance .
What does a personal guarantee mean?
A personal guarantee can be described as an undertaking given by a business person whereby he/she offers to pay a particular business’s liabilities in case the business is unable to do so. Their own money could be in the form of savings, homes, or any other investments that they lose when the business is unable to recover debts. For many small business owners, this can be a daunting prospect and a serious barrier to taking risks or expanding operations.
A personal guarantee can be the deciding factor when it comes to receiving funding, so it’s crucial that prior to undertaking this commitment, we understand both the meaning of a personal guarantee and it’s obligations, and also gain an understanding of what the benefits of personal guarantee insurance are, especially for SME business owners.
The Meaning of Personal Guarantee Insurance
Personal Guarantee Insurance (PGI) can be described as a valuable safety shield for small business owners. The benefits include financial protection for small business owners by covering a significant part of the debt secured under personal guarantee loans or debts to reduce personal financial risk
Benefits of Personal Guarantee Insurance
There are some key benefits to personal guarantee insurance to be considered by every small business owner:
Protects Personal Assets
The most important benefit of personal guarantee insurance is protecting personal assets from being seized to pay business debts. In the miserable circumstances of a business bankruptcy or credit default, it may cover a considerable part of the debt guaranteed, protecting the loss of savings, homes, or other investments.
Makes Finance Accessible
Small business owners can approach lenders with more confidence with personal guarantee insurance. It provides a motivated approach to risk management while making them more attractive borrowers. This may lead to easier access to options for financing, better loan terms, and higher credit limits. These things play a significant role in business growth and development.
Supports Business Growth
By reducing the personal financial risk related to personal guarantees, personal guarantee insurance allow small business owners to make bolder decisions. These decisions can be investing in new pieces of equipment, hiring additional staff, or expanding into a new market. Personal guarantee insurance assures you to pursue growth opportunities without fearing personal financial damage.
Allow Peace of Mind
Running a small business is stressful enough without added personal liability worries. Small businesses and entrepreneurs can reduce that stress with personal guarantee insurance. It allows them to focus on strategic decisions and operational expertise rather than continuously worry about the worst-case scenario of their businesses.
Customisation and Flexibility
Small business owners might benefit from flexibility using personal guarantee insurance. This kind of policy could be customised to satisfy the unique requirements of many businesses. A startup owner seeking initial funding or an established small business owner looking to expand can customise coverage limits and terms to line up with unique circumstances and risk profiles.
Risk Management
Being a small business owner, it is crucial to manage the financial risk and enhance the business’s credibility and reliability in front of stakeholders including lenders, investors, and suppliers. Personal guarantee insurance offers small business owners a promise to reduce risk and increase opportunity.
Conclusion
Personal guarantee insurance is not just a considerable protective measure; it has key benefits for small business owners. It helps entrepreneurs boost growth with confidence while protecting their personal assets and financial well-being. Every small business owner facing the complexities of financing and growth can explore the benefits of a personal guarantee insurance which is considered an investment in both protection and peace of mind.
Running a small or medium business is risky enough already, reducing these risks with tools such as personal guarantee insurance can help ensure that business owners focus on innovation, creating jobs, and boosting economic growth.
If you are considering your financing options and are looking at either a personal guarantee, or personal guarantee insurance, then contact the team here at Pegasus Funding, with over 600 forms of finance available for businesses, we can assist with the PG process, and potentially arrange finance that does not require a personal guarantee or personal guarantee insurance, saving you time and money in the process!