Applications for finance backed by personal guarantees rose 63 per cent year on year in the second quarter of 2026, highlighting continued demand for borrowing among UK small and medium-sized businesses despite a challenging economic backdrop, according to data from Purbeck Insurance Services.

The average loan secured against a personal guarantee reached £317,000 during the quarter, remaining above £300,000 for a second consecutive quarter and underlining the growing financial exposure faced by business owners.

Working capital remained the primary reason for borrowing, accounting for 36.2 per cent of all applications. Demand for working capital finance has almost doubled over the past two years, reflecting mounting pressure on company cashflow as operating costs continue to rise. According to the Office for National Statistics, 40 per cent of trading businesses reported higher input costs in April 2026, the highest proportion since late 2022.

The figures also suggest businesses are continuing to invest despite economic uncertainty. Finance for growth initiatives represented one in five applications, while borrowing for asset purchases, development projects and acquisitions collectively accounted for almost a quarter of demand.

One of the report's more notable findings was the increase in borrowing among newer businesses. Start-ups sought an average loan of £345,000 during the quarter, exceeding the average amount borrowed by more established companies for the first time in a year. The figures indicate that younger businesses, which typically lack trading histories and significant assets, are assuming greater levels of personally guaranteed debt.

Todd Davison, managing director of Purbeck Insurance Services, said the increase in working capital borrowing suggested many businesses were raising finance to manage day-to-day trading pressures rather than expansion alone.

He added that higher borrowing by start-ups was particularly striking because founders were taking on substantial personal liabilities before establishing a proven trading record. With average loan values remaining above £300,000, he said, directors should be aware of the financial risks associated with providing personal guarantees.

Purbeck's data suggests that while many SMEs remain under pressure from higher costs and economic uncertainty, businesses are continuing to seek external finance both to support day-to-day operations and to fund longer-term investment.