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Personal Guarantees

Personal Guarantees – How can PBC Business Recovery & Insolvency Help?

Personal Guarantees

For Individuals:

  • Should the worst happen and your company fails, leaving you with personal guarantee liabilities we are happy to assist. Should the problem be large (both in number of guarantees and value) you may need to consider a formal personal insolvency solution.
  • In other cases the personal guarantee may be disputed or you just require an independent party to assist you in negotiating a settlement.  We can either assist you in these negotiations or recommend a specialist personal guarantee company who can work for you in order to bring the matter to a conclusion.
  • We are always happy to discuss any issue with you and your client. As always there is no obligation for the initial meeting, which is confidential and impartial.


Most business owners are advised to incorporate their business and one of the main advantages is to provide limited liability status. Ordinarily, this provides protection against claims on the directors’ personal assets should the company fail.

However and particularly in the last decade, a number of creditors have demanded personal guarantees. These range from the bank or finance companies to landlords but increasingly these demands include trade suppliers.  Generally speaking the courts have adopted a stance that personal guarantees have been provided with full knowledge of the director who understands his commitment and acknowledges the giving of a personal guarantee has been properly explained.  The obligation to prove differently usually rests with the guarantor.

We have seen many examples of supplier contracts which suggest you will ‘honour the company’s obligations’. Does this suggest it is a personal guarantee or are you confirming the company will stick to the agreed terms and conditions?

Personal Guarantees – How can PBC Business Recovery & Insolvency Help?

For a Free initial consultation
Telephone (01604) 212150 (Northampton office) or (01908) 488653 (Milton Keynes office)

A look at personal guaranteesA recent survey by Wirefund revealed that over half (55%) of SME business owners do not know what a personal guarantee is. This certainly matches our experience at PBC as we see many cases where company directors cannot remember whether they signed personal guarantees or not.


What is a personal guarantee?

In the last decade, there has been a trend among creditors, including banks, finance providers, landlords and, increasingly, trade suppliers, to ask for personal guarantees. As the name suggests, this is a contractual promise to pay the liabilities of another. If you’re seeking a small business loan, for example, you might be asked to provide a personal guarantee of the loan. Such guarantees are unsecured, which means they are not tied to any specific asset such as property. For the lender, such guarantees make a loan agreement more secure, as responsibility for paying it back falls not just to the borrowing company but to the individual directors involved as well.


Why do they matter?

The unsecured nature of the guarantee means that you will be personally responsible for repayment of the loan in the event it cannot be paid back by the business itself. All your personal assets, therefore, are at risk, from the family home to cars. If you do not have sufficient assets to cover the debt, then you may be made bankrupt and with it encounter all the ongoing difficulties associated with a poor credit rating. It is also worth pointing out that if several directors give a personal guarantee to the same creditor, then the creditor does not have to take action against all of them and can instead choose to pursue just one.


It is clear that personal guarantees carry significant implications, and certainly, the courts have tended to take the view that the guarantor undertook the commitment with full knowledge of the facts. It is easy to sign up in haste in order to secure funding. However, it is important to seek advice in advance to ensure the full ramifications are understood should the guarantee be called upon. You may also want to consider personal guarantee insurance to provide some protection in the event of difficulties.



Should you find yourself in a position whereby your company is failing and you are left with personal liabilities, then there are a range of options to consider from personal insolvency procedures through to negotiation of a settlement. We offer a free, confidential, no-obligation initial consultation to discuss the issues you are facing.