Investing in your business through a buy-to-let mortgage can offer substantial rewards, helping you to secure commercial property to expand your operations or gain profit through letting to a third party. However, it’s essential to be informed and prepared for the potential risks.
In this blog, we’ll delve into the strategies for protecting against a business buy-to-let personal guarantee, allowing you to invest in your business while safeguarding your financial interests.
What is involved in a business buy-to-let personal guarantee?
A personal guarantee is a legal agreement made by business owners and directors, guaranteeing personal responsibility for mortgage repayments if the business is unable to meet its obligations.
By signing a personal guarantee, the business owners place their personal assets, such as property or savings, on the table as collateral to support the mortgage.
This agreement is designed to add an extra layer of security for lenders, increasing the chances of mortgage approval.
For more information on what signing a personal guarantee for a business buy-to-let mortgage means for business owners, read our previous blog.
[Link to Signing a Personal Guarantee on a Business Buy-to-Let Mortgage: What It Means for You]
Options to Limit Risk
Distribute the risk
Sharing the financial responsibility with multiple business owners or directors can help distribute the risk. With multiple parties involved, the burden or personal guarantee is lessened, and you’re not solely responsible for covering the entire mortgage in the event of a default.
Negotiate the guarantee terms
It’s worth discussing the terms of the personal guarantee with the lender. You may be able to limit the scope of the guarantee, such as specifying a capped amount or predetermined period during which the guarantee is in effect.
Personal guarantee insurance
While implementing the measures above may help to reduce the risk, uncertainties are an inherent part of business and some factors are beyond your control. That’s where personal guarantee insurance (PGI) comes into play.
PGI offers a safety net by covering a portion of the value of the assets used to secure the guarantee, allowing you to invest with confidence. Using PGI allows you to focus on growing your business while leaving the worry of personal guarantee liabilities behind.
Secure peace of mind with PGI from Purbeck
At Purbeck, we understand the risks business owners undertake when signing a personal guarantee.
Our PGI policies cover up to 80% of the assets used to secure your personal guarantee, offering you the ultimate safety net, and allowing you to invest in your business with confidence.
To find out more about how PGI can help you to invest securely, don’t hesitate to contact a member of our team today.