What Is A Personal Guarantee?

If you are looking to secure funding for your business, as a company director, you may be asked to give a personal guarantee. This is seen as a form of security for the company providing funding. This guarantee means that the director becomes liable for the debt is the business was to default on repayments.

Generally speaking, a personal guarantee agreement will be created with the lender’s interests in mind. As a company director, it is essential that you carefully review the agreement before you sign it. We would recommend that you speak to our solicitors to gain legal advice before signing it agreement. Our local commercial solicitors in Peterborough can then outline the key elements of your personal guarantee. We will also outline the potential risks laid out too.

A personal guarantee is seen as a promise to the lender. It provides the lender with the reassurance that they will recover the money they lend. A personal guarantee states a direct will cover the debt personally if the business is unable to. As a director, it is important that you take the right precautions to ensure unnecessary personal risk is avoidable. This is what our solicitors can help you with.

When considering signing a personal guarantee you need to remember that your personal assets are at risk. This includes your home, for example. Personal guarantees are legally binding contracts. They are enforceable once signed.

Be aware of immediate repayment demands too. It is possible that creditors could demand repayment at their discretion. This could be done with no notice given. You may also see that your agreement includes indemnities. This means that as the company director you could made liable for additional losses that are suffered by the lender.

Your agreement may include ongoing liability too. This is where guarantees might extend to future debts and accrued interest. Our solicitor will help review the terms so you can avoid any unexpected obligations. An inability to meet the guarantee could lead to personal bankruptcy. This could also result in disqualification from future directorships. It is important to note that if the business falls behind on repayments, it can damage your personal credit score. This can be the case, even if bankruptcy is avoided.

Need help ensuring that you are protected in the agreement of a personal guarantee? Call our commercial legal experts now to see how we can help and protect you, and your business.