37% of SMEs using borrowing to keep afloat

Todd Davison, managing director at Purbeck Insurance Services, said: “The findings from the Small Business Strategy report that late payment is closing an estimated 38 UK businesses every day, is consistent with what we are seeing directly through Purbeck Insurance Services’ latest data on personal guarantee backed borrowing.

“In Q4 2025, 37 per cent of all loan applications were for working capital to support cashflow, up from 33 per cent a year earlier.

“This is a clear indicator that a significant proportion of SMEs are using borrowing defensively — to plug gaps created by rising costs, payment delays and tightening liquidity, rather than to pursue growth.

“The problem is particularly acute in sectors such as construction.

“Looking at loan behaviour in this sector, our analysis shows that over half of the loans taken by constructions firms are for working capital.

“At the same time, many directors are being asked to secure borrowing with personal guarantees, putting personal assets on the line just to stay afloat.

“That’s why Personal Guarantee Insurance (PGI) plays an increasingly important role — giving business owners greater confidence to access essential funding while reducing the personal financial risk that often comes with it.

“Tackling late payment must now be a central pillar of the Small Business Strategy.

“Ending this entrenched practice would ease pressure on working capital, reduce reliance on emergency borrowing, and allow SMEs to focus on growth rather than survival.”