A Guide to Director’s Personal Guarantees
What is a personal guarantee? Why would I need one?
At the height of the business boom, banks were often very happy to provide loans to companies. They often required the directors of these businesses to sign an agreement, stating that in case of the company being unable to repay these loans, the signer, or guarantor, would be personally responsible for the repayment.
Although these agreements are not a problem as long as the business is repaying its loans under the agreements agreed by the lender, they have become more of an issue since the 2008 financial crash. Suddenly, companies have found themselves in difficulty, and lenders are entitled to pursue bankruptcy against the guarantor if they cannot repay the terms agreed when the original agreement was signed.
Limited company vs. sole traders/partnerships
Personal guarantees were generally only signed by directors of limited companies. Sole traders or those who work in a business partnership will often have been issued loans in their names.
Both kinds of loans put individuals at risk of losing assets or even being declared bankrupt if repayment fails.
What if I can’t pay?
If you signed a personal guarantee for your limited company and both the company and you fail to keep up with repayments, your lenders will pursue you to recover the outstanding debt. If you go straight to an Insolvency Practitioner, you will find they are legally obligated to try and get the best deal possible for your lenders.
Even if your bank account is overdrawn, your creditors can take legal action against you, and you could even find yourself under investigation.
What do I do next?
There are always options. You don’t have to face the stress and uncertainty of being liable for repayments by yourself. Bell & Company, as pre-insolvency consultants, specialise in helping people like you. If your loan has been sold off by your original lenders to a so-called ‘vulture’ fund who aggressively pursue debt repayment, Bell & Company’s involvement can help take some pressure and strain off your shoulders.
Bell & Company are fully informed of the most effective methods in order to get you the best possible outcome. They have numerous success stories, helping clients who were being pursued aggressively by lenders and creditors start fresh, without the threat of further repayments hanging over their head.
Contact Bell & Company here to see what they can do for you.