A fool with a pen in hand!

The heading pretty much sums up my view of a director who grants a personal guarantee for company debts. I am possibly being a little harsh as giving a personal guarantee can sometimes be a non-negotiable term of contract or borrowing.

In the past I have seen directors who have guaranteed practically every supplier, making you question why they are trading under the vehicle of a limited liability company. Others sign personal guarantees unwittingly; only to discover what they have committed to after things have gone wrong.

One of the biggest misgivings relates to the small loan guarantee scheme. Guarantors are informed the Government will guarantee 75% of the outstanding debt if things go wrong.  The problem is the “Outstanding debt” is any residue debt AFTER the bank have exhausted all avenues of recovery, including enforcement of any personal guarantees.  The last time the Conservative Party were the shadow government I was asked to advise on these schemes and my recommendations actually went into their manifesto.  Unfortunately, the scheme has still not been amended so would-be guarantors of these loan schemes need to be aware of the consequences of your business failing.

Should you be faced with a personal guarantee being pursued the advice must be that you seek independent professional advice without delay. Maintaining a clear and regular dialogue with the guaranteed company can help but an independent advisor can also look into the validity of the guarantee generally and assist you in reaching a mutual settlement rather than staring down the barrel of bankruptcy.

If you require any advice or assistance on any insolvency-related matter then please contact Gary Pettit or Gavin Bates at PBC Business Recovery & Insolvency on (01604) 212150.