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What is a personal guarantee ("PG") ?

A PG is an agreement taken by the provider, generally the directors of a company, to take responsibility for the debts of the company in the event that the company is unable to pay back its debts (i.e. a bank overdraft, a finance agreement..).

A company director might be required to provide a PG to support a bank overdraft facility, loan, invoice finance facility, a lease on a property, a finance agreement (i.e. lease purchase on a motor vehicle or item of plant) or a line of credit from a trade supplier.

By providing a PG this provides the recipient with the comfort and reassurance in your belief in the future viability of your business and its ability to manage its debts.

What to consider in advance of signing an agreement to provide a PG?

As a director you might provide a PG on behalf of your company in the belief that this will never be called upon by the recipient. Do not be naive!

In the event of your business not being able to fulfil its contractual liabilities then you may find yourself exposed to PGs.

In advance to providing any form of PG it is important for directors to understand precisely what and where their responsibilities start and finish.

Personal Guarantee Insurance

PG insurance is available for sole or multiple guarantors over LTD company borrowings whether they are new or existing borrowings.

Contact us today to see whether this is available to you.

If your business finds itself insolvent, is it possible to get out of a personal guarantee?

Although this is a stressful time, many company directors and guarantors of company debt ask this question.

Do not become an ostrich and stick your head in the sand as the problem won't disappear!!

PGs come in a variety of different forms. It is therefore essential to obtain professional advice at the earliest opportunity to discuss what is available to you in the event of your company defaulting on its debt.

There are many technical issues that need to be considered in order to consider the validity or otherwise of any PG. Please contact us in advance to considering either settling or negotiating on any PG.

What should you do if a personal guarantee has been actioned?

As soon as the personal guarantee has been actioned, you should first seek legal advice and we can help you to make the best choice according to your own situation.

Legal action is not cheap and most creditors will prefer to take an alternative route if possible.

In reality, it is far better to speak to a professional before the personal guarantee has been called upon. Quite often we are able to offer advice that can prevent the personal guarantee from being actioned. Remember that a personal guarantee is not related to your business but a lender may be able to take control of your home and personal possessions if you are unable to pay the outstanding amount.