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Personal Guarantee Business Loan

Can’t Pay Your Personal Guarantee?

A personal guarantee will put directors’ home and assets at risk. Find out how they can affect you and what your options are.

As a director of a business, it is almost certain that you will be asked to sign a personal guarantee (PG) on a business loan. A personal guarantee can be a good way to access finance that otherwise would not be available however, if circumstances change, you can be left personally exposed.

It is rare to consider the worst-case scenario when taking a business loan and even less likely that a lender will warn you of the consequences. Despite the serious implications of a personal guarantee, there are always commercial solutions available.

When Can a Personal Guarantee be Activated?

This depends entirely on the wording of your loan agreement but generally, a personal guarantee may be ‘triggered’ in the event of missed payments or any form of insolvency.

Often, if you miss a payment a lender will give you the opportunity to repay the arrears. However, they are under no obligation to do so. One missed payment will allow them to personally pursue you. In fact, some lenders can even start to pursue you if they think that you may miss payments due to signs of business failure.

Any insolvency action will automatically ‘trigger’ a guarantee on a loan. This can be anything from an attempt to dissolve a company to the appointment of administrators. Again, if a lender is under the belief that your company will enter liquidation, they may be able to begin proceedings against you personally.

What Happens if a Personal Guarantee is Called In?

 If this happens, you are personally liable for the debt. Your lender will send you a request for a payment in full, they will request the ‘crystalised’ amount (i.e. the final bill for what you owe). This is the amount they will pursue you for if you do not pay.

Usually from this point on, they will also add further interest, default charges and legal fees. So, your liability can continue increasing.

If you do not pay, your lender will begin legal proceedings against you. This mainly takes two forms:

1. Obtaining a judgment

This is a court order officially recognising your debt. After securing a judgement, the lender will apply for an Order Charging Land to be placed on your home or properties. This order means that if you ever sell the property that you must give a certain amount to the lender.

2. Statutory demand and bankruptcy

A statutory demand is a formal request to repay a debt. Unlike a judgement, it is not a legal document and does not require court action. However, it can be as, if not more, serious. A statutory demand is the first step to making you bankrupt. You can read more about the impact of bankruptcy here. If you have received a statutory demand as a result of a personal guarantee, you have 18-21 days to take action.

Regardless of the method, your personal finances as well as your home and assets become at risk. Your lender will look to recover money the easiest way, usually this is through your residential home but may also include investments or other properties.

Terry Bell


Can’t thank Bell and Company enough

We were in a terrible situation in which our home was at risk due to poor financial advice regarding a directors loan. It was a very stressful time. Our experience with Bell and Company started with Liam who was extremely…

Can’t thank Bell and Company enough

We were in a terrible situation in which our home was at risk due to poor financial advice regarding a directors loan. It was a very stressful time. Our experience with Bell and Company started with Liam who was extremely responsive, knowledgeable and reassuring during our onboarding. Once our case had been accepted we were looked after extremely well and professionally by Sam. Sam looked after every aspect of the case so we didn’t have to deal directly with anyone but him. He kept us fully up to date and was always at the end of the phone when we needed him. The costs for this service seemed steep at first but in the end a very small fraction of what they ended up saving us – over 100k.

Can’t thank them enough. We are now in a position in which we’re secure in our home and can start to look forward again.

Kirsty – GB

What to do Next

If you have a personal guarantee or if you are being pursued by a lender, you need to act quickly. Early action always means that the outcome is better for you. If you wait, it could be too late to do anything.

There are always solutions available, no matter how advanced your situation is. Maintaining control is what is most important. However, if mishandled, you could end up in a worse position than you started in. That is why we always recommend seeking expert help before making any decisions.

For over a decade we have been negotiating directly with business lenders to get the best possible settlements for our clients. We do this by utilising working relationships, experience and a team of experts to reduce your debt, protect your assets and help get you back on track. Watch a recent case study here.

Our team of personal guarantee specialists are always available to offer advice and solutions. Contact us today for your free case review.

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