UK SMEs are carrying a combined unprotected £672 billion of debt, which could leave them vulnerable to any future financial shocks, a study has revealed.
The research from Legal & General has found that three in four small and medium-sized businesses in the UK have some form of corporate debt, with an average borrowing of £200,000.
It said 75% of the 5.6 million SMEs across the UK are grappling with this debt and estimated that around 20% have protected their borrowing with insurance.
However, around £672 billion of business loans are unprotected in the SME sector currently.
This estimated figure does not include personal loans, overdraft facilities or credit cards used by SME owners to support their businesses.
This news comes soon after separate research from software company, IRIS, showed that SMEs fear they could soon go under without further support from the government.
Legal & General’s study also indicated that over half of UK SME business owners have also given personal guarantees to secure their borrowing.
This risks the financial wellbeing of themselves and their families for the sake of their enterprise, said Robert Betts, market development manager at Legal & General.
“Most small businesses rely on a handful of decision-makers to keep things up and running, sparing little thought for what might happen if one of them was diagnosed with a serious illness, or sadly passed away,” explained Betts, who also asked:
“Can the business repay its financial obligations without these people? What plans do they have to ensure the business can continue?
“The considerable business loan protection gap is a stark reminder that businesses cannot afford to ignore these questions anymore and must consider protecting their borrowing.”