Whether you’re expanding your team, relocating to new offices, or investing in new equipment, taking the next step forward in business often requires significant funding.
For many business owners or directors, the ticket to this growth can be found in the form of a business loan. However, a lender often requires a director’s guarantee, which means putting your personal assets, such as your home or savings, on the line.
If that gives you a twinge of unease, it's only normal. After all, what will happen to your assets if circumstances beyond your control disrupt your repayment plans?
If you’re feeling vulnerable, you’re not alone. Many directors feel the weight of the personal financial risk when they sign on that dotted line.
Fortunately, there is a way to protect your assets and regain peace of mind.
In this blog, we’ll explore how director’s guarantee insurance is designed to shield your personal and business finances from the potential fallout of a defaulting loan.
What is a director’s guarantee?
A director’s guarantee is a legal agreement where a company director is required to personally guarantee the repayment of a business loan if the company cannot meet its obligations.
Lenders often insist on this as a form of security to ensure repayment, even if the business faces financial difficulties.
While director's guarantees can help businesses secure funding essential for growth, they also come with significant risks.
If the business is unable to meet its financial obligations, the director’s personal assets are at risk of being claimed by the lender to settle the debt.
Not surprisingly, this can leave many directors feeling exposed to financial uncertainty.
The risk of signing a director’s guarantee
Signing a director's guarantee may seem like a necessary step to accessing that vital funding for your business, but it's also important to understand the potential consequences:
Loss of personal assets
As mentioned, the most significant risk of signing a director's guarantee is the loss of your assets. If your business defaults, your personal property, including your home or savings, could be used to repay the loan.
Impact on your credit score
Defaulting on a director's guarantee can also impact your personal credit rating. A poor credit score can make accessing future financing, such as personal loans or mortgages difficult.
Legal and financial stress
If your lender takes action to recover the debt, you could face multiple legal fees, not to mention the stress of drawn-out financial strain.
How director’s guarantee insurance works
Director’s guarantee insurance, also known as personal guarantee insurance, is designed to protect business owners and directors from the risks of signing a director’s guarantee.
With cover available for up to 80% of the loan amount, this insurance safeguards your personal assets in the event that your business struggles to repay its loan.
Director’s guarantee insurance offers a safety net by reducing the financial impact on your personal finances.
Tailored policies allow you to:
- Select the coverage amount that suits your needs
- Insure multiple directors, offering wider protection for your team
- Focus on running your business without worrying about your personal financial risks.
Why choose Purbeck?
When it comes to something as important as protecting your assets through a director’s guarantee insurance, you need a provider you can trust.
At Purbeck, we understand the threat directors face when signing a guarantee. That's why we provide tailored solutions to protect your assets so you have the confidence to grow your business securely. Here's why we stand out:
- Backed by expertise – Our policies are backed by a leading, A-rated insurer endorsed by A.M Best and S&P
- Unrivalled experience – We are the UK’s leading provider of personal guarantee insurance, catering specifically to SMEs.
- Trust and transparency – We’re regulated by the Financial Conduct Authority (FCA), ensuring that our policies meet the highest standards.
- Tailored support – Our specialists work closely with you to find the right policy to support your unique situation.
Director’s guarantee insurance from Purbeck – Your safety net for business success
Don’t let the risks of a director’s guarantee hold you back. Contact our specialist team today to explore how director's guarantee insurance can provide you with the protection and peace of mind you need to achieve your business goals.
