Personal guarantee

In plain terms

A personal guarantee (PG) is a commitment by an individual — usually a company director or owner — to repay a business debt personally if the company can't. Limited liability normally keeps a director's personal finances separate from the company's debts; a personal guarantee deliberately sets that protection aside for the guaranteed amount. If the business defaults, the lender can pursue the guarantor's own assets to recover what's owed.

It's distinct from company-level security such as a debenture, which is granted by the business over its own assets. A PG reaches past the company to the person behind it. Lenders ask for one to reduce their risk; for the director, it converts a business risk into a personal one.

Why it matters to your business

Signing a personal guarantee is one of the most significant commitments a director makes. It can put personal savings — and, where a charge is taken over property, the family home — on the line for the company's borrowing. Even with a healthy business, an unexpected downturn could trigger a claim, so a PG should never be signed casually.

It also affects how you should structure finance. Spreading borrowing across facilities that each demand a PG can quietly stack up personal exposure. Before signing, it's worth understanding the cap (the maximum you're liable for), whether it's joint and several with other directors, and whether independent legal advice is recommended. Crucially, not all business lending requires one — see no-personal-guarantee loans.

How Credicorp lends

Credicorp lends to the company, not to the director personally — and does not require a personal guarantee. That's a deliberate choice: as a lender of short-term working capital to UK limited companies, Credicorp assesses the business on its own merits and trading record, and the company alone is responsible for the facility.

For a director, that means the protection of limited liability stays intact: your personal assets aren't pledged against the company's borrowing. It's a meaningfully different proposition from facilities that ask you to underwrite the debt yourself. You can read more about how this works on the business loans page, or apply when you're ready.

Questions to ask before signing one

If a lender does ask for a personal guarantee, get clear answers before you sign:

• What's the cap? The maximum amount you could be liable for — including interest and costs, not just the principal.
• Joint or several? If several directors guarantee, can the lender pursue any one of you for the whole debt?
• Is property involved? Whether the guarantee is supported by a charge over your home.
• How is it released? The conditions under which the guarantee ends.

A personal guarantee is a serious legal undertaking; taking independent legal advice before signing is sensible. This page is educational and not legal advice.