Personal Guarantees

One option available to directors to secure funding is the granting of a personal guarantee. This is where an individual accepts responsibility for a third parties debts or obligation to pay, and can be called upon by the lender in the event of default, if the primary borrower is unable to pay for whatever reason.

The instances in which a personal guarantee are offered can be varied covering bank loans, asset and property leases, trade suppliers and invoice finance.

The guarantee can be secured against personal assets such as property and whilst the actual process can vary depending on the lender or type of funding sought, it is important to fully understand the implications and seek appropriate advice prior to the granting of any personal guarantee.

Other aspects where you may require advice and guidance include:

  • Receipt of a demand for payment under your personal guarantee
  • Concerns regarding a default which may result in a demand being made
  • The possibility of exiting an existing demand

You should always obtain professional advice on all aspects of personal guarantees to fully understand the consequences before proceeding further.