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Personal guarantees

Will we ask for a personal guarantee?

Will we ask for a Personal Guarantee

To facilitate your business's funding request, we may ask you to provide a personal guarantee. This requirement may serve as a form of security or demonstrate your personal commitment to the financial arrangement.

When requesting a personal guarantee, we will specify a limited amount for which you are responsible. In certain cases, we may also request that you cover any additional costs incurred in the process of recovering the amount owed to the bank.

Typically, a guarantor is someone who is actively involved in the business, such as a director, member, or shareholder, particularly if your business is structured as a Limited Company or Limited Liability Partnership. However, a guarantor can also be a third party, like a parent or spouse of the borrower, who is willing to assume this responsibility.

What is a personal guarantee?

What is a Personal Guarantee

A personal guarantee is a commitment you make to repay amounts owed to the bank if your business fails to meet its obligations under the agreed terms of a facility. This means that, should repayment issues arise, you are agreeing to cover the amounts up to a specified limit.

Importantly, if your business continues to perform well and adheres to the agreed terms, we will not require you to repay any amounts owed.

We offer different types of personal guarantees, which will depend on the specific facility and your funding application. Each type is designed to meet the unique needs of your business while providing clarity on your commitments.

What may a guarantee cover?

What may a guarantee cover

  • All Monies: This type of personal guarantee encompasses multiple facilities provided by the bank. It includes any increases in existing facility limits, as well as any new facilities your business may acquire following the provision of your personal guarantee. Even if facility limits rise, we will only require repayment of the amount specified in your personal guarantee.
  • Facility Specific: This guarantee pertains to a single, specific lending facility. It encompasses any increases in the facility limit that may occur after you provide your personal guarantee. Similar to the 'All Monies' guarantee, we will only request repayment of the amount stated in your personal guarantee, regardless of any limit increases.

 

Will we ask for any other personal security?

Will we ask for any other personal security

In certain circumstances, we may request that you provide a legal charge over an asset, which could include your main residence or an investment property.

Should your business default on the agreed terms and the guarantee crystallises, you will be responsible for repaying the outstanding balance owed to us, in accordance with the guarantee amount. If you subsequently miss any personal payments, we may need to seek a legal charge following a repayment demand made against you.

If you have any questions or require further clarification, please don’t hesitate to reach out. We are here to assist you in understanding your commitments fully.

Will this impact my personal credit score?

Will this impact my personal credit score

Signing a personal guarantee will not directly affect your credit score. However, if your business defaults on its debt obligations and a demand is made under the guarantee, you will become personally responsible for repaying the specified amount. Should you then fail to settle the amount due under the guarantee, this could have a negative impact on your personal credit score.

What should I consider when asked to provide a personal guarantee?

What should I consider when asked to provide a personal guarantee

When contemplating a personal guarantee, it's important to assess whether this commitment aligns with your personal circumstances and financial situation. Providing a personal guarantee could render you personally liable for your business's debts, which may represent a significant and long-term obligation.

We strongly advise that you take the time to thoroughly understand the specific terms associated with a personal guarantee. In fact, seeking independent legal advice from your own solicitor is highly recommended, and in certain cases, we may require it to ensure you are fully informed.

While you should not feel compelled to provide a personal guarantee, it is crucial to recognise that doing so may influence the level of support we can offer your business. We encourage you to consider alternative options that may be available, such as leveraging any assets your business may possess to assist with your funding application.

What happens if you are no longer involved in the business?

What happens if you are no longer involved in the business

If you decide to resign as a director or member, or if there are any material changes in your circumstances, it is important to inform us immediately. This enables us to reassess our security position and consider the funding we are currently providing to your business, as well as explore any alternative options that may be available.

Please note that you will remain liable under the terms of your personal guarantee until we formally release you from it. This liability continues in circumstances such as:

  • Resigning as a director or member of your business
  • Selling your shareholding
  • Being removed from the business’s bank account mandate
  • Your business undergoing an insolvency process or being dissolved

Furthermore, in the unfortunate event of your death, any responsibilities under your personal guarantee will persist and will transfer to your estate.

We appreciate your proactive communication regarding any changes, as this helps us support you more effectively 

What if I no longer wish to provide a personal guarantee?

What if I no longer wish to provide a personal guarantee

If you are considering discontinuing your personal guarantee, please refer to the terms associated with your guarantee. These terms will outline the notice period required to formally discontinue your guarantee. To limit your liability under the guarantee, you will also need to provide formal notice at this time.

While you will remain liable under the terms of the guarantee until we officially release you from it, we will ensure that your liability is limited to the outstanding balance owed to us by your business at the conclusion of the notice period.

We encourage you to inform us as early as possible if you are contemplating giving notice to discontinue your personal guarantee. This proactive communication will allow us to reassess our security position and the funding we are currently providing to your business, enabling us to explore any alternative options that may be available to you.

Can a third party guarantor access information about my company's outstanding liabilities under the guarantee?

Can a third party guarantor access information

When we accept a personal guarantee from a third party to support your borrowing, we may share information regarding their outstanding liabilities under the guarantee. This will only occur with your explicit permission or if permitted by the terms of the financial products provided to you.

We also encourage open communication between you and your guarantor. This dialogue can provide your guarantor with a clearer understanding of your business's financial performance and the management of the borrowing.

When will we request payment under your personal guarantee?

When will we request payment under your personal guarantee

In the event that your business defaults on the agreed terms related to the funding, we may invoke your personal guarantee and request repayment of the outstanding balance, up to the specified limit outlined in the guarantee.

Rest assured, if your business continues to meet its obligations under the agreed terms of the facility, we will not require any repayment from you.

Additionally, should your business enter an insolvency process and be unable to settle the debt owed to us, we may also seek payment under your personal guarantee.

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