PGI Knowledge Centre

For many people wanting to start (or grow) their own small business, a personal guarantee is the only way to successfully secure essential funding, but what is a personal guarantee, and is it a requirement to take our a loan for a new business?

Ahead of the October budget, we suggest 5 key measures to support the engine room of the economy

As a company director, you’re legally accountable for your company’s records, accounts and performance, even if you hire someone else to handle certain day-to-day responsibilities (such as an accountant). The information that you’re responsible for sending to Companies House are as follows:

September 2021: Following news of an 18 month high in registered company insolvencies[i], we are urging the owners of small and medium sized businesses to ensure their personal assets, such as their home, bank account and savings, are protected if their business should become insolvent.

Nobody wants to think about debts, but the fact of the matter is that it’s always been a part of business (and likely always will be!). Sometimes, debt can become insurmountable for a limited company or a sole trader, but is a company director liable for its debts? 

Personal Guarantee backed loans risk being dismissed in favour of credit cards and overdrafts

You can be doing lots of business, but still be relatively cash poor. The late payment of invoices makes cash flow a real issue for SMEs who, having done the work and paid for supplies, are left to wait to receive the revenues for the labour.

• -  70% of start-ups seek new finance in 2021
• -  Savvy entrepreneurs protect £35m in loans through personal guarantee       insurance
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July 2021: As ONS data shows an unprecedented rise in new company registrations in Q1 2021 versus Q1 2020[i] continuing a trend seen in 2020 - ‘the year of the start-up’[ii] - our latest survey has revealed that 70% of start-ups[iii] have secured or are planning to secure finance in 2021 to help support cashflow. Amongst these businesses, 37% of the owners or directors surveyed have already signed Personal Guarantees in 2020 to access finance, raising fears of loan stacking and multiple personal guarantees signed by one individual.

Directors may choose to voluntarily dissolve a business for a range of reasons, such as the retirement of the owner, the end of the useful life of the company from a legal perspective, or simply because it proved to be an unsuccessful venture. It’s the simplest and most cost-effective way to close a private limited company – but it isn’t always as straightforward as many directors hope it would be.

July 2021: The final COVID loans data released by the Government this week[i] failed to provide clarity on the total value of loans which required the business owner or director to sign a Personal Guarantee, putting their personal assets at risk if the business fails. Based on a Freedom of Information[ii] request made by our MD, it is estimated that 8% of the value of all the CBILS loans advanced required a personal guarantee. This equates to £2.1bn in loans taken over the past year.