Personal Guarantees

Directors often put up personal guarantees.

There are situations in which certain creditors will ask for personal guarantees. Most commonly these are banks, finance companies, and lessors, particularly for new or start-up companies.

In certain industries, it is not uncommon for suppliers to require personal guarantees.

Firstly, Bounce Back Loans and CBILS (up to £250,000) do not have personal guarantees.

However, you may also have an overdraft, invoice finance arrangements, or other loans which may still have personal guarantees.

It is important to note that all personal guarantees should be clear, separate documents and you should be made aware of them before you sign them.

What to do if you have a personal guarantee?

It is not uncommon for directors not to be aware of the guarantees that have been signed so probably the first step is to ask for copies of the guarantees that were signed. Once you have received this you need to review them and establish the purpose and scope of the guarantee.

Most guarantees are unsecured, by which we mean they are a debt of you as an individual and not connected to a particular asset. Therefore, the creditor can act against you but this could also include obtaining security over your property.

If a guarantee is secured it is almost certain that you will be aware of it as various paperwork, legal charges etc will have been completed at the time of the guarantee being signed.  However, this may not always be the case.

There are various firms that offer services to fight personal guarantees. In our experience, particularly in respect of bank and finance companies, the guarantee is likely to be valid. However personal guarantees that are buried deep within terms and conditions are more likely to be questionable. In simple terms, you as the director should have been made aware of the document you have signed and the implications for you.

Having checked the above the next stage is to engage with the creditor. Whether this is to arrange payment or agree on a payment plan. Sometimes creditors will accept a settlement at a reduced level to bring the matter to a conclusion.

If you are unable to pay you may need to consider one of the personal insolvency options.

We are happy to discuss this with you further and offer a free 20-minute initial call to discuss your problems.