Small business owners have told how personal guarantee insurance played a critical role in guiding their business to success when they experienced cash flow problems.
The founders of Xtreme360, a trampoline park located in Cambridgeshire, UK, secured asset finance to fit out their new venture, which included signing personal guarantees.
As it entered a growth stage, it encountered cash flow problems, as ongoing costs ate into profits, leaving a shortfall for covering loan repayments. The directors had secured personal guarantee insurance from Purbeck Insurance Services and turned to the company for guidance during their financial difficulties.
David Parr, finance director of Xtreme360, said: “Cash flow kills businesses and I could see this was becoming a real danger for us. We had started this business with the best of intentions, but costs escalated and until the asset finance was paid off, we would be operating at a loss.
“We contacted Purbeck who helped us think through our options objectively. They introduced us to a finance broker to look at refinancing the debts; discussed the option of sub-letting excess space within the premises; and introduced capital allowances experts. They also put us in touch with one of Purbeck’s other clients who ran a franchised trampoline park to discuss best practices.”
The team worked out a restructuring of the finance arrangements and attracted a new investor.
Parr added: “Our debts are now settled, which is a considerable weight lifted after three years of considerable stress. The business is in excellent shape, very much a going concern and with growth plans working well.
“Knowing that the personal guarantee insurance was in place created valuable peace of mind during a very difficult time. Purbeck did as much as they could to help us avoid defaulting on the loan.”
Close to one-third of SMEs have found that the cash flow burden has worsened over the last year according to a survey by the insurer.
Todd Davison (pictured), director of Purbeck Insurance Services said: “Xtreme360’s experience as a start-up is far from unique. It’s vital that directors of small businesses look at ways they can mitigate the risk to their personal assets if they take a personal guarantee-backed loan.
“We also know that in many instances there are ways through the trading problems our policyholders face and we will do our utmost to support them.”