2 min read
What a personal guarantee really means
A personal guarantee (PG) makes you personally liable for the company's debt if the business cannot repay — potentially putting your savings, and in some cases your home, on the line. Lenders like PGs because they add security; directors dislike them because they pierce the limited-liability protection that incorporating was meant to provide. If you would rather not sign one, you have real alternatives. See director's guarantee vs company borrowing.
Ways to avoid or limit it
| Alternative | How it keeps you protected | |
|---|---|---|
| Company-only lending (no PG) | The lender relies on the company alone | |
| Asset finance | The asset is the security, not you | |
| Invoice finance | Secured on invoices, often without a PG | |
| PG insurance | Covers part of a PG you can't avoid |
The cleanest route is a lender that does not ask for a PG at all — it assesses the company and looks no further. Where a facility is secured on an asset or your invoices, a PG is often unnecessary. And where you cannot avoid one, PG insurance can cover a share of the exposure. Read no personal guarantee loans.
Negotiating a PG down
If a lender insists, you can sometimes negotiate: cap the guarantee at a fixed sum rather than the whole debt, limit it to a share among multiple directors, or seek its release once the company has established a track record. But the simplest protection is to borrow where no PG is required in the first place. See the answer on borrowing without a personal guarantee.
The Credicorp view
Credicorp lends to the company with no personal guarantee — your home and personal assets are never on the line for the facility. That is a deliberate difference from much of the market. Compare our business loans or register to apply. Educational content, not financial advice.
Frequently asked questions
How can I avoid giving a personal guarantee?
Borrow from a lender that does not require one — some, including Credicorp, assess the company alone. Facilities secured on an asset (asset finance) or your invoices (invoice finance) often need no personal guarantee either. Where one is unavoidable, PG insurance can cover part of the exposure.
What does a personal guarantee put at risk?
It makes you personally liable for the company's debt if the business cannot repay, potentially putting your savings and in some cases your home on the line. It effectively pierces the limited-liability protection of incorporating, which is why many directors prefer to avoid signing one.
Can I negotiate a personal guarantee down?
Sometimes. You may be able to cap it at a fixed sum rather than the whole debt, share it among directors, or have it released once the company builds a track record. But the simplest protection is to borrow where no personal guarantee is required at all.
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Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.