Isn’t that a comforting phrase?  We often use it when we are in the midst of troubling times or perhaps to explain some news that wasn’t quite what we were hoping for.  I have heard many students this week use the phrase, it seems to put disappointing exam results in a context that is somehow part of some bigger picture ... 

It’s not just students who use this phrase to excuse ‘today’ as if whatever has just happened is an important part of some bigger plan.  It’s used if we want to try and comfort someone trying to cope with a problem or to excuse a position we wish we hadn’t got ourselves into.

Whilst I appreciate how the phrase ‘everything happens for a reason’ is often used with the best intentions, if we use it to excuse our own position I am not so sure of its value.  

No matter what happens, it’s all part of a bigger picture.

Personally, I don’t subscribe.  That’s too easy and potentially a lazy, dangerous attitude that chooses to ignore decisions that may have contributed to ‘where I am’.

Let’s look at the phrase more literally - if we do, it makes more sense - ‘Everything happens for a reason!’  My exam results were poorer than predicted - perhaps the reason is I could have revised more?  (sorry if the timing of that is poor!).  My business is in trouble! - perhaps the reason is I could have paid a little more attention to a business plan or been a bit more caring towards my customers and suppliers?  Maybe I could have resisted the attraction of a comfortable life and tried harder to keep abreast of the times?

Harsh, probably, but if we do not look at today as a product of what’s happened in the past we are in danger of failing to learn from our previous decisions or learn from how the environment or our actions of yesterday impacted upon today.  Could today have been different if yesterday we had just made different decisions.  

At Purbeck we are in the business of helping company Directors appreciate the decisions they are making when applying for business finance and signing Personal Guarantees.

Signing a Personal Guarantee may place a Director’s house and all of their worldly assets at risk.  The Personal Guarantee removes the protection afforded by the limited liability status of their company.  If the business defaults on the terms of the finance agreement the Personal Guarantee gives the lender direct access to recover their losses from the personal estate of the director.  Personal Guarantees are required to be signed when applying for most forms of business finance.  If a Director is not prepared to sign a Personal Guarantee it is likely they will not be offered that finance. 

So in the real world it is clear that Personal Guarantees form an important part of the growth of a business because they provide access to finance that may otherwise have been inaccessible. 

So in some ways if a Director wants to grow their business by accessing business finance, the signing of a Personal Guarantee is somewhat inevitable.   

If anyone suggests directors do not know what they are signing, I do not think that is true.  I believe Directors do understand what they are signing, and they are often encouraged to seek independent legal advice before they sign a Personal Guarantee.  In reality the emotion associated with making sure a particular loan is negotiated will allow them to place the risk they are taking on into a ‘stress box’ and for the moment close the lid.  If their business needs the finance, in reality they have little option but to sign the Personal Guarantee.  This is part of the law of risk and reward, hopefully!

Once the finance has been arranged however, that ‘box of stress’ (one of many!) has the habit of popping open.  Knowing that the Personal Guarantee places everything ‘on the line’, is a sobering thought..  Risk, however, is something every Director is familiar with and that is part of the risk and reward mix of being an entrepreneur and running their own business.  But does accepting the risk associated with Personal Guarantees have to be like that?

Recently the choice for Directors has expanded. If a company Director chooses to support their company in raising finance by signing a Personal Guarantee they can now apply for Personal Guarantee Insurance.  

Because their company is benefiting from the finance it is only right that the company should pay the premium, that’s a no-brainer.

None of us is in complete control of the future. We hear of business failures all the time - they can happen to any company and often company failures cannot be predicted. We can’t know everything that’s happening at a key supplier or customer, we can’t know for certain how customers appetites may change overnight. There are countless reasons that can lead to company failure and whilst the best planning will avoid most things, no company is without risk. 

What company Directors can do is consider their options when they make the enormous decision to place their personal wealth at risk when signing a Personal Guarantee.  If their company needs the finance, normally they have no option.  Now they do have an option to insure some of that risk with Personal Guarantee Insurance.

Should the worst happen to a company, the words ‘everything happens for a reason’ are not very comforting:–

‘Personal Guarantee Insurance has saved my house, my savings and my relationship’ would be far more appealing to hear.