What does signing a personal guarantee commit

2 min read

Personal liabilityFor the debt

If company failsIt's called

CapNegotiate one

AdviceTake it first

What you are agreeing to

Signing a personal guarantee means that if the company cannot repay the loan, the lender can pursue you personally for the shortfall — from your own money and, potentially, assets. It converts limited-company protection into personal exposure for this debt. The guarantee guide sets out how it works in full.

When and how it is called

A guarantee is typically enforced after the company defaults and the lender cannot recover from the business. Where two directors guarantee jointly and severally, the lender can pursue either for the whole amount, as the co-applicant answer explains. Guarantee insurance can cover part of the exposure.

Limiting your exposure

Before signing, ask whether the guarantee can be capped at a fixed amount rather than unlimited, whether it is joint and several, and what triggers it — all potentially negotiable. Consider a no-guarantee facility instead, and take legal advice on anything substantial. Make sure the company can genuinely afford the loan on the affordability calculator so the guarantee is never called.

Frequently asked questions

Can a personal guarantee be capped?

Often, yes — you can ask for a guarantee limited to a fixed sum rather than the full, uncapped debt. It is worth negotiating, especially on larger facilities, to bound your personal exposure.

Is my home at risk under a personal guarantee?

Potentially, if the guarantee is uncapped and you have no other assets to meet it, though enforcement against a home is a serious step. Capping the guarantee and taking advice before signing helps you understand and limit the risk.