Personal Guarantees

If you’ve ever signed additional paperwork to secure company borrowing, there’s a good chance you gave a personal guarantee without fully realising what it meant. Understanding how personal guarantees work and what one actually exposes you to is one of the most important pieces of director help we provide.

A personal guarantee can turn a company debt into a personal one overnight. That’s why it sits at the centre of the director advice we give at BCIA Recovery & Turnaround, particularly when a business starts to struggle financially.

One of directors’ most pressing concerns is the risk of a personal guarantee being called in. We help you understand exactly where you stand, and what can still be done about it. Get in touch today for a free, confidential first consultation.

What Is a Personal Guarantee?

So, what is a personal guarantee exactly? It’s a legal agreement in which a director personally promises to repay a company debt if the company itself fails to do so. Lenders and creditors commonly ask for one before extending credit to a limited company.

Normally, a limited company protects its directors from personal liability for business debts. A personal guarantee removes that protection for a specific debt. If the company can’t pay, the guarantee holder can pursue the director directly, for the full amount, plus interest and costs in many cases.

Personal guarantees turn up in more places than directors expect. They’re commonly attached to:

• Bank facilities and business loans
• Peer-to-peer lending arrangements
• Second-tier and bridge funding
• Invoice discounting agreements
• Trade creditor agreements

Directors Guarantee: How It Works in Practice

A directors guarantee doesn’t sit quietly in the background until things go wrong. It’s active from the moment it’s signed, and lenders rely on it as security. Here’s what typically happens:

• The lender or creditor agrees terms with the company, on the condition that a director personally guarantees repayment
• The guarantee is usually written into the agreement or signed as a separate document
• If the company defaults, the guarantee holder can demand payment directly from the director
• Multiple directors may each be liable for the full debt, not just a share of it – this is known as “joint and several liability”
• The guarantee holder doesn’t always need to exhaust action against the company first before pursuing the director personally

That last point catches a lot of directors off guard. Many assume a lender has to chase the company fully before coming after them. In many personal guarantee agreements, that’s simply not true.

How BCIA Handles Personal Guarantees

This is where the right advice makes the biggest difference. Our role is to balance the company’s restructuring or insolvency options against your personal exposure under any personal guarantees, not treat them as two separate problems.

Our specialists have a strong track record in:

• Challenging poorly executed or poorly worded guarantees: Many guarantees contain legal or technical defects (incorrect execution, missing signatures or ambiguous terms) that can invalidate them or limit what’s actually owed.
  
• Negotiating partial settlements: In many cases, a guarantee holder will accept a reduced, manageable figure rather than pursue the full amount through lengthy legal action.
  
• Talking directly to your creditors: We engage with creditors, solicitors and debt collectors on your behalf, taking the emotion out of the situation and focusing on a constructive way forward.
  
• Agreeing time-to-pay arrangements: Where a debt is valid and can’t be avoided, we work to ease the immediate pressure through a structured, affordable repayment plan.
  
• Securing breathing space: Above all, we aim to buy you time – time to plan your next move, without the constant threat of immediate enforcement hanging over you and your family.

We start by properly assessing the strength of the guarantee itself. Not every guarantee that’s called in is enforceable exactly as written, and understanding that distinction shapes everything that follows.

Personal Guarantees and Company Liquidation

If a company enters liquidation, any personal guarantees attached to its debts don’t disappear along with the company. The guarantee is a separate, personal contract between the director and the lender. It survives the company’s closure entirely.

This means a director could still be pursued for a guaranteed debt even after the company has been formally dissolved. It’s a common misconception that liquidation wipes the slate clean for everything, including personally guaranteed borrowing. It doesn’t.

This is exactly why personal guarantee exposure needs to be assessed alongside the company’s wider financial position, not as an afterthought once liquidation is already underway.

What to Do If You’ve Signed a Personal Guarantee

If you know or suspect you’ve signed a personal guarantee and the company is struggling, a few steps make a real difference before a creditor makes the first move:

1. Locate the original agreement and confirm exactly what was signed.
2. Check for any limits, conditions, or defects in how it was executed.
3. Clarify whether liability is joint and several, if more than one director signed.
4. Get advice before the guarantee holder contacts you formally.
5. Explore negotiation and settlement options early, while you still have room to do so.

Acting early, rather than waiting for a demand letter to arrive, gives you meaningfully more options.

Why Directors Come to BCIA for Personal Guarantee Support

Personal guarantees are one of the most stressful parts of director life, precisely because they blur the line between business and personal risk. Directors often don’t know whether a guarantee is even enforceable in their specific case, or what a creditor is realistically likely to accept.

Our senior advisors, working from our Matlock and Manchester offices, bring 50 years of combined experience to reviewing personal guarantees and negotiating directly on your behalf. We look at the wording, the creditor’s likely approach and your realistic options.

If you’ve signed a personal guarantee and you’re worried about what happens next, don’t wait for a creditor to act first. Get in touch with BCIA Recovery & Turnaround for free, confidential director support and find out exactly what can be done to protect you.