An estimated £672bn of corporate borrowing by SMEs is unprotected, according to new research from Legal & General, leaving many SMEs across the UK vulnerable to any future financial shocks.

The data revealed that 75% of the UK’s small and medium size businesses are carrying some form of corporate debt, with an average borrowed figure of £200,000.

L&G’s research suggested that if 75% of the UK’s 5.6 million SMEs are grappling with this debt, around just 20% of them have protected their borrowing with appropriate insurance products.

The group has therefore estimated that £672bn of business loans are currently unprotected in the SME sector.

“Not only is the business loan protection gap endangering the future prospects of SMEs, but it’s time that business owners considered the ‘bigger picture’ of the financial risks they and their business could face in the event of the death or serious illness of themselves or key employees,” said L&G market development manager, Robert Betts.

However, L&G added that this current estimated figure does not include SME owners who have supported their businesses by injecting cash via personal loans, overdraft facilities, or credit cards.

Over half (54%) of UK SME business owners have also given personal guarantees to secure their borrowing, and when taking personal guarantees and other forms of credit into account, the analysis indicated that the overall business protection gap could extend into the trillions.

“When SMEs struggle to stay in control of their finances, it can have a knock-on effect on their ability to pay employees and suppliers, cover operating costs and pursue growth opportunities,” Betts added. “The cocktail of multiple pressures combines to threaten their day-to-day livelihoods.

“Speaking with an adviser can help mitigate the wider effects of debt as they can help identify and implement the right policy to protect a person’s business against any future financial shocks without compromising the owner’s personal finances.”

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