Todd Davison, Managing Director, Purbeck Insurance Services
The latest British Business Bank report on small business lending[i] shows gross lending recovering at the headline level. The sharper, more granular reality comes from Purbeck Personal Guarantee Insurance data on personal guarantee-backed borrowing by the owners of small and media sized businesses across the UK. The data shows a notable strain on working capital and higher borrowing by start-ups.
Applications for personal guarantee insurance to protect directors for the risks of defaulting on a loan, were 63% higher in Q2 2026, that the same period in 2025. In addition, the average personal guarantee backed loan taken by SMEs has exceeded £300,000 over the first half of 2026.
The biggest concern is the number of personal guarantee insurance applications for business loans for working capital — the day-to-day funding needed simply to keep trading. 36.2% of all applications for loans taken for this reason. In fact, working capital borrowing has almost doubled in just two years.
Looking at trends in start-ups we can also see that for the first time in over a year, small businesses created in the past 2 years are borrowing more than established firms, with the average start-up loan reaching £345,000. These are directors putting their homes on the line before they’ve had the chance to build a track record, a customer base, or any financial cushion. That is an extraordinary level of personal risk to be carrying at the most vulnerable stage of building a business. It says much about how thin the margin for error has become for Britain’s entrepreneurs.
Against this backdrop, we have a new PM at Number 10. The early signals are encouraging with promises of business rates reform, greater devolution and stronger support for small and medium-sized enterprises, and Prime Minister Burnham has pointed to plans to reduce youth unemployment and improve public procurement opportunities for British firms.
It is encouraging that in his first calls with business groups — including the CBI, British Chambers of Commerce, the Federation of Small Businesses, Make UK, Small Business Britain and the Startup Coalition — the language was around greater certainty, clearer long-term direction, faster decision-making and a stronger business voice in shaping policy[ii].
Certainty is precisely what has been missing. But small business owners have heard promising language from three Prime Ministers in two years now, and what they need next is delivery they can actually plan around.
Some of that has started to arrive. VAT has been from domestic electricity bills from 1 October, a measure that will also apply to non-VAT registered small businesses, charities and residential care homes that qualify. He has also announced a 20% cut in business rates for pubs, clubs and small music venues. These are welcome, but the overwhelming majority of the small businesses behind our own data — the working capital-squeezed building firm, the start-up founder personally guaranteeing £345,000 to get off the ground — sit outside those specific initiatives.
What would genuinely move the needle is threefold. First, the business rates reform Burnham has promised needs to extend well beyond hospitality and high street. Second, the “faster decision-making” his government has promised to businesses needs to show up specifically in access to finance. The finance providers of personal guarantee-backed borrowing to businesses depend on policy stability as much as on interest rates. Every month of uncertainty about business rates, tax and regulation is a month that pushes more of that risk directly onto the shoulders of individual directors. Third, policy needs to catch up with who is actually doing the borrowing.
In the first half of 2026, applications for personal guarantee insurance to reduce the risk of a small business loan from female directors grew 77% year-on-year. This is higher than the 64% growth we saw across the market as a whole. The proportion of applications from female-led businesses grew from under 12% to nearly 13% in a single year. That’s progress, and it echoes what the Investing in Women Code’s own progress report found[iii], that signatories have outperformed the wider market in supporting female founders for six consecutive years running. But it’s progress from a low base — only around 19% of U.K. SMEs are currently run by female founders[iv] — and it will stall if the wider borrowing environment doesn’t give women, and every founder, the confidence and stability to keep going.
Government-backed initiatives like the Investing in Women Code prove that targeted, sustained commitment moves the dial. Burnham’s government now has the chance to apply that same discipline to small business policy more broadly through a genuinely stable multi-year framework on tax, rates and access to finance that SME directors can plan a business around.
[i] https://www.british-business-bank.co.uk/about/research-and-publications/small-business-finance-markets-report-2026
[ii][ii] https://www.gov.uk/government/news/pm-puts-new-offer-on-the-table-to-businesses-in-first-talks-with-industry-groups-24-july-2026
[iii] https://assets.publishing.service.gov.uk/media/6a47b449045e1108aaa5eb37/iwc-annual-report-2026.pdf
[iv] https://assets.publishing.service.gov.uk/media/6a47b449045e1108aaa5eb37/iwc-annual-report-2026.pdf
