How, and when, are personal guarantees used?

A personal guarantee is a form of security. It is put in place to ensure that the lender will receive their agreed funds back in the case that the business defaults on their payments. If this is to happen, the lender can take ownership of the assets you have given as a personal guarantee, this could be property, vehicles, or plant.

This is part of the reason lenders will take personal credit checks against you, as they will need to be aware of your overall net worth. They may also check your credit history. With some products, lenders may only require a personal guarantee on a part of the funds. An example of this is the CBILS (coronavirus business interruption loan scheme) loan. This is a product made to relieve businesses from the COVID-19 pandemic, which includes no personal guarantees up to £250k. 

Insuring your Personal Guarantee

For your own peace of mind, it is possible to insure your business against a personal guarantee collection. Insurance against personal guarantees can cover up to 80% of your claim, although this is dependent on the total being guaranteed, as well as the financial stability of the business, Please be aware we cannot offer any kind of insurance, although we can point you in the direction of someone who can help.