Insight: Maintaining financial resilience in the face of rising costs

As rising costs, economic uncertainty and geopolitical instability continue to pressure UK manufacturers, SME business owners are becoming increasingly focused on balancing growth ambitions with financial resilience.

Todd Davison, MD of Purbeck Insurance Services, explores why more manufacturers are turning to personal guarantee-backed finance, and the steps directors can take to protect both their businesses and personal assets in a higher-risk lending environment.

For many SME UK manufacturers, the last few years may have felt like operating in a state of permanent uncertainty. While there are genuine growth opportunities emerging across the sector, businesses continue to face relentless pressure from rising operating costs, higher borrowing costs, wage inflation and ongoing economic uncertainty.

Scrutiny of financial risks

The conflict in Iran has added further pressure by driving volatility in global energy and logistics markets, increasing operational costs at a time when many businesses are already struggling to protect margins. As a result, many manufacturers are being forced to balance investment ambitions with tighter cash flow management and greater scrutiny of financial risk.

Yet despite these pressures, many manufacturing businesses remain ambitious, resilient and determined to grow.

That resilience is reflected in our latest data on the demand for personal guarantee-backed business loans. This is where a director or directors of the business are required to put their personal assets, such as their home, on the line as security for a business loan.

By signing a personal guarantee, if the firm fails, they stand to lose much more than their livelihood.  That’s why an increasing number of manufacturer directors/owners are taking insurance to protect against that risk.

Purbeck Insurance Services’ Q1 2026 figures show that applications for Personal Guarantee Insurance (PGI) from small to medium-sized manufacturers more than doubled year on year, increasing by 135%, while applications linked specifically to growth investment doubled over the same period.

Manufacturers take risk from business loans

While construction sees the biggest demand for PGI, not far behind is manufacturing. 9% of all the applications we receive from business leaders across the UK now come from those running manufacturing firms, up from 6.4% a year earlier. These figures tell a compelling story about the current state of the SME manufacturing sector.

Far from retreating in the face of economic pressures, many manufacturers are continuing to invest in growth. Businesses are seeking funding to purchase machinery, expand production capacity, invest in technology, strengthen supply chains and improve productivity. However, our data also suggests an increased level of financial awareness and risk consciousness among directors and owners. Manufacturers are recognising that sustainable growth today requires a much sharper focus on financial resilience.

In practice, resilience is no longer simply about surviving difficult periods. It is about creating the confidence to make strategic decisions, invest for the future and pursue opportunities without exposing the business — or the individuals behind it — to disproportionate risk.

Smaller manufacturers are especially vulnerable because they often lack the financial reserves or access to capital available to larger organisations. This means many directors are taking on increased personal exposure to secure the funding their businesses need.

Average loan in SME manufacturing is £188,000

Again, this is made very clear in our data. The average loan value associated with manufacturing PGI applications rose to more than £188,000 in Q1 2026, up significantly from the previous year. This reflects not only higher borrowing requirements but also the increasing financial stakes for SME business owners.

Historically, personal guarantees were often viewed as a routine requirement of business borrowing – a necessary evil, in other words. Today, directors are thinking much more carefully about how they manage and mitigate that risk.

So what is a personal guarantee?

A personal guarantee gives the lender a written promise, made by a director or a number of directors, to accept liability for a company’s debt. This means that if the business defaults on a loan, the director’s home, car and anything in their personal bank account could be used to settle the outstanding debt. If they co-own their home with a spouse or partner, they will also have to sign the guarantee.

If the personal assets aren’t sufficient to cover the debt, the business owner could face bankruptcy, which would have long term ramifications and stop them from being a company director in the future.

A minority stakeholding in the business won’t offer protection, as a lender will go after whoever has the most chance of settling the debt.

What type of finance requires a personal guarantee?

Personal Guarantees can apply to a wide range of loan facilities, including those available from P2P lending platforms – in fact, Purbeck sees most of the demand for Personal Guarantee Insurance coming from the alternative finance market.

How to cut the risk

Before deciding whether signing a personal guarantee is right or wrong, business owners should get some independent advice. An accountant, solicitor, commercial broker or financial adviser can help work out the best options for the business and advise on the additional ways the personal risks can be cut when signing a personal guarantee.

Agree to share the guarantee with co-directors. In this way, the risk is not just being shouldered by one person

Work out with the lender if a time limit can be agreed for the guarantee and a cap on the amount, but bear in mind that interest rates are rising and costs added to the debt can soon mount up.

Also, it’s sensible to investigate if part of the loan rather than the whole loan can be guaranteed, and that settlement of the debt is sought first from company assets before enforcing the guarantee. Clearly, in this instance, the business owner will need to show what assets within the company could be used – this could be machinery, tools, or computer equipment.

Finally, consider Personal Guarantee Insurance to mitigate the risk.  This means if the business does fail, 80% of the loan will be settled by the insurance rather than the business owner’s home, savings and other personal assets being called on to settle the debt.  The level of cover is usually based on a fixed percentage of the personal guarantee the company director wishes to insure.  This is dependent on whether the corresponding finance facility is secured or unsecured.

Ultimately, financial resilience is not just about surviving difficult trading conditions, it’s about creating the confidence to continue investing, innovating and growing in uncertain times. While SME manufacturers continue to face challenging times, our data suggests the sector remains ambitious and forward-looking. Firms are approaching finance with greater discipline, clearer planning and a stronger understanding of risk, recognising that sustainable growth depends not only on operational resilience, but also on protecting the individuals who have put their own assets at stake.