Finding out your husband has signed a personal guarantee can feel a bit like someone’s just dropped a financial time bomb in your lap. That’s a valid feeling, and you’re not alone – 78% of directors who apply for finance are asked to sign a personal guarantee.
They’re an important part of many SME growth plans. On the one hand, personal guarantees are often the only way SMEs can secure the funding they need to grow. On the other, they can put family savings, and even the family home, on the line if the business struggles.
The good news? There are ways to reduce that risk and keep your family’s financial security intact.
What Exactly is a Personal Guarantee?
Put simply, a personal guarantee is when a director promises to cover the business’s borrowing if the company can’t. Sounds straightforward, but the consequences can get very personal, very fast.
- If the business defaults, the director could be chased for repayment.
- That might include personal savings, property and, in some cases, the family home.
- It can also hit personal credit scores, making future borrowing harder.
For partners, this can be stressful, especially if you weren’t involved in the decision but could still feel the impact.
The Impact on Partners and Families
Here’s the thing: even though you may not have signed anything yourself, shared assets could be at risk. That’s why so many partners only find out what a personal guarantee really means after the fact, when they suddenly feel exposed.
But it’s not all doom and gloom. Personal guarantees are part of everyday business finance, and most don’t end badly. The key is understanding the risks and putting safety nets in place, so that if things do go wrong, your family isn’t left paying the price.
This is why many directors opt to take out Personal Guarantee Insurance (PGI) – think of it as a safety harness that’s designed to protect your personal finances in the event that your husband’s company can’t repay their loans.
The Role of Personal Guarantee Insurance (PGI)
PGI exists to cover a significant portion of the liability associated with a personal guarantee. If a business loan is secured against a director’s guarantee, PGI helps to reduce the financial impact should the lender call in the debt.
Here’s how it works:
- It provides cover for both secured and unsecured loans.
- It reduces the personal risk for directors and, by extension, their families.
- It gives directors confidence to secure funding without putting their loved ones under unnecessary stress.
For families, PGI is peace of mind. Even if your husband’s business hits a rough patch, you know your savings and home aren’t automatically on the line.
Support Beyond Insurance
At Purbeck, we don’t just provide insurance and disappear. Our Business Support service helps directors manage debt, recover their business and improve credit control.
It’s our job, as advisors, to ensure you never get to the point where your personal guarantee is called in. And, if it does happen, we’ve got you covered.
That’s less stress for families, and less stress for business owners.
Why Purbeck?
We pioneered Personal Guarantee Insurance in the UK.
- We’re the UK’s PGI market leader
- Our policies are underwritten by A-rated insurer Markel International.
- We’re fully FCA regulated for credibility and peace of mind.
- We have years of experience across industries, from construction to property.
In short: we get it. We know how tough it is running a business, and just how important it is that you feel financially secure as your husband takes the risks he needs to grow his business.
If your husband has signed a personal guarantee, yes, it’s natural to feel unsettled. But you’re not powerless. With Personal Guarantee Insurance, you can protect your family’s financial future while giving your partner the freedom to grow their business.
Want to learn a little more about how PGI can give you peace of mind? Click here to learn a little more, or get in touch with our team today for a no-obligation quote.
