Do I need to give a personal guarantee?

A personal guarantee, or PG, is a commitment by a director to be personally responsible for the debt if the business cannot repay it. Lenders use it to share the risk, and for a lot of business borrowing it is a normal part of the deal.

The answer depends on the product, so it is worth being specific:

• Unsecured business loans. A PG is commonly required, because there is no asset securing the facility.
• Revolving credit facilities. In most cases a PG is required, particularly on unsecured facilities, for the same reason.
• Property finance. Usually required, even though the property is the primary security. It gives the lender recourse if the property does not cover the loan on default. Larger or asset-rich borrowers can sometimes limit or avoid it.
• Asset finance. The asset provides the security, so reliance on a PG is often lower, though newer businesses and higher-value facilities are still commonly asked for one.
• Invoice finance. Terms vary, and the emphasis on a PG can be lighter, because the facility is backed by your sales ledger.
• Merchant cash advances. Sometimes required, usually on higher amounts or weaker credit profiles. Many smaller advances do not need one.

The important thing is to understand your exposure before you sign. A guarantee can be limited to a capped amount rather than unlimited, and that is the kind of term worth negotiating.

We are not solicitors, and a guarantee is a personal legal commitment, so we would always suggest you take your own advice on the wording. What we do is make sure a PG requirement is visible and clearly explained up front, never buried in the small print, and we factor it in when comparing which offer is genuinely the best for you.