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What are Personal Guarantees and what do they mean for company Directors?

Posted by Dean Cox on Aug 10, 2018 10:25:35 AM

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?

Being able to pursue your aspirations for the business can certainly be an attractive reason to potentially expose your personal assets. In times of financial security when business is good, it can be a justified means of security to enable the business access to the finance to expand ahead of natural cash flow. Since the last recession most business finance has required directors and executive boards to support external finance by providing joint and several personal guarantees for even quite modest sums lent to limited companies. Since many directors are joint owners of the property that supports their personal guarantees many of their spouses who are not directors of that business are also asked to sign personal guarantees for the benefit of the lender.

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Have you considered Personal Guarantee Insurance?

Because they significantly increase risk for the borrower, personal guarantees can cause enormous stress, and could potentially have disastrous impacts on you and those you care for most. Fortunately, it’s possible to get insurance against the risk that your personal guarantee is called by a lender.

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Topics: #pgi, #personalguarantee, #personalguaranteeinsurance, #commercial finance, #bankruptcy

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