Should I avoid business loans that require a personal guarantee?

As a small business owner, you it is necessary to assess your risk appetite carefully before you agree to funding that requires your personal assets to be used as collateral. Fortunately, there are many options available.

A personal guarantee is a common requirement for small business loans, but many entrepreneurs may not fully understand the risks involved. A personal guarantee means you are personally responsible for the loan if your business fails to pay it back. This can put your personal assets at risk, including your home, car, savings and more.

According to a recent survey conducted by Purbeck Insurance, 13 percent of small business owners have canceled a loan due to a request for a personal guarantee, and we can assume that those who signed a personal guarantee may have done so out of misgivings, or mistrust. that they have few alternatives. One factor that can change attitudes is insurance to protect against risk. In the same survey, 46 percent of respondents said they would be more likely to sign a personal guarantee if they had insurance.

Despite the risks, a personal guarantee can be a valuable tool for small business owners seeking funding. By understanding the implications and considering insurance options, you can make informed decisions regarding your financing needs and protect your personal assets.

Insurance coverage for personal guarantees

If you are not comfortable with the risk of borrowing money with a personal guarantee, there are insurance options available to protect the assets of small business owners. Personal Guarantee Insurance (PGI) can provide cover for the entire loan amount, protecting your personal assets in the event of default.

Alternative loans

How you borrow to fund your business will probably have a bigger impact than the cost: if your risk appetite is low, you might choose to avoid personal guarantees and pay a higher interest rate. At Swoop, we make it easy to compare different offers so you can choose the one that’s right for you and your business needs.

How Swoop can help

Personal guarantees can be a risky proposition for small business owners. Options for business owners include insurance to protect your personal assets or seeking alternative loan options.

Swoop is a business funding and savings platform that enables businesses to find the right funding solutions, save on business costs, and find customized insurance solutions, all in one fell swoop. Register on our platform to find out which loans do or do not require a personal guarantee, or to speak with an insurance expert to better understand your options.

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