PGI Knowledge Centre

Every day we receive calls from our policyholders asking for help in distressed business situations. For many people who run lifestyle businesses the cash flow is intrinsically linked to the weekly shopping budget and the need to keep the flow of paid invoices is essential.

March 2019 sees a couple of fairly major events for me. First of all, I hit sixty, something I’m ill prepared for and to be honest I’m probably looking to come to some sort of a deal to remain at 59. Then just over a week later is the matter of a Brexit Exit. I’m not sure that Theresa May is having a better time here either. Over the last few months she’s learned to dance like me, wear bad suits and look increasingly old, we’ve a lot more in common that I first thought. Meanwhile I have no more knowledge of the full ramifications of the effects of a deal/no deal/no idea deal than I had when the word “Brexit” first appeared on my news feed a few years back.  

There are an estimated 4.5 million Personal Guarantees signed by company Directors in the UK alone. Since the recession it’s rare to find a lender that doesn’t ask for a Personal Guarantee if they are extending facilities to a limited company. Most Directors are reluctant to sign Personal Guarantees for the simple reason that if everything were to go wrong the likelihood of losing their home is amongst their greatest fears.

Accompanying the Personal Guarantee is normally a request to seek independent legal advice as to the enforceability of the guarantee and to acknowledge the likely effect on personal assets should the Personal Guarantee be called in.

When considering your business finance options as a company Director, you might be asked to provide a personal guarantee as an assurance for a business loan or another source of financing on credit. This puts you into a direct relationship with the lender, who could legitimately pursue you personally if your company becomes insolvent. But is this a risk that you think is worth taking?

After building a business over many years it could just take six weeks to lose the lot if you have signed a Personal Guarantee.