Purbeck is now calling on the government to ease the pressure on small businesses by asking lenders to agree to a three month moratorium on existing loans.
According to the BDRC Finance Monitor, 1.4 million small businesses have external funding in place, and Purbeck estimates that 30% to 40% of these will be backed by personal guarantees.
Purbeck also warned that the Coronavirus Business Interruption Loan Scheme asserted that personal guarantees would not be required from business owners applying for funding, yet it has not been made clear how lenders could regard applications from businesses where a personal guarantee backed loan is already in place.
Todd Davison, MD of Purbeck Insurance Services said: “While just 15% of small business owners with Personal Guarantee Insurance in place are showing signs of severe financial distress, the broader small business community is suffering.
“Reports suggest however, that the number of businesses securing funds through the CBILS is at a low level.”
He added: “Our customers are fearful of committing to more debt when they have existing loans to honour.
“We are advising them to contact existing lenders and landlords to discuss a payment holiday but a wider initiative to offer small businesses a three month loan moratorium would help ease the financial burden at this crucial time.”