Personal Guarantees

In the context of a loan, a Guarantee is a contract under which the person providing the guarantee to the lender promises to be responsible for the debt of the borrower. 

The guarantor may, therefore, become personally liable for repaying that debt if the borrower defaults under the loan (e.g. if they default on their repayments or become insolvent). 

The provision of guarantees to support a loan can be a useful way for business owners to access finance if there are no business assets that can be used as security for the debt. 
  
If the business defaults under the loan and they are unable to repay us, we will be able to make a demand under the guarantee and seek repayment from the guarantors.  However, if a guarantor is unable to make payment, we may seek to recover the outstanding debt through the courts. If we obtain a court judgment against the guarantor, we may then be entitled to enforce against the guarantor’s assets to seek recovery of that judgment debt (e.g. a charging order on their home).   

You should get independent legal advice before you proceed it is vital you understand both the advantages and disadvantages of agreeing to provide a personal guarantee and you should be fully informed and understand the terms you are agreeing to.  

You may wish to consider alternative funding options which might not require a personal guarantee and instead are secured on business assets.