Business Funding · 9 min read

Personal Guarantees on Business Loans: What UK Directors Sign Up To

Alex BeardsleyFounder & Director

|Updated July 2026

It's usually the last page of the pack. The funding is agreed, the money is days away, and there's one more signature: a personal guarantee. Most directors sign it late at night without fully reading it, which is exactly why we've written this.

A personal guarantee isn't a formality. It's a legal promise that if your company can't repay, you will, personally. It's also a completely standard part of SME lending that millions of UK directors have signed. The point of this guide isn't to scare you off, it's to make sure you know precisely what you're agreeing to before you do.

What a Personal Guarantee Actually Does

Your limited company exists partly to separate business debts from your personal finances. A personal guarantee deliberately pierces that separation for one specific debt. If the company defaults, the lender can pursue you as an individual for the outstanding amount, and they don't generally have to exhaust every route against the company first.

Why do lenders ask for them? Because limited liability cuts both ways. A lender advancing £100,000 to a company with £2,000 of assets is really lending against the directors' commitment. The guarantee makes that commitment enforceable, and it's why guaranteed lending is cheaper and more available than it would otherwise be.

Limited vs Unlimited: Read This Clause Twice

• A limited guarantee caps your liability at a fixed amount or a percentage of the loan. Some lenders ask for guarantees covering as little as 20% of the facility, others the full amount
• An unlimited guarantee covers the full outstanding balance plus interest plus the lender's recovery costs, with no ceiling

The other clause that catches directors out is “all monies”. Some guarantees cover not just this loan but any borrowing the company ever takes from that lender, including facilities you haven't thought of yet. Know which type is in front of you before you sign.

What Happens if It's Called

If the company fails owing the money, the lender writes to you personally demanding payment. If you can't pay, enforcement can escalate through a county court judgment, charging orders against personal property, attachment of earnings, and ultimately bankruptcy proceedings. Where a guarantee is supported by a charge over your home, the home itself can be at risk.

That's the worst case, stated without varnish. The practical takeaway is simpler: never sign a guarantee for an amount you couldn't survive paying, and never assume the business failing is impossible. Every director who's had a guarantee called assumed that too.

Who asks, and who publishes that they do not

Lenders say this on their own pages in short sentences. iwoca states that for limited companies it asks for a personal guarantee, typically from a company director. Funding Circle states that if a loan is approved a personal guarantee will be required, and its introducer factsheet says director guarantees are taken on every unsecured loan. Capify says all of its products require one, usually from the majority shareholder or a combination of shareholders. Liberis says it will ask for guarantees where the applicant is a limited company or a limited liability partnership.

Two lenders publish the opposite, and their terms show what avoiding a guarantee costs. Uncapped says it takes no equity, personal guarantees, warrants or hidden fees, and prices fixed term loans at a fee of 0.7% to 1.5% a month, averaging about 1%, over a maximum of 24 months, for limited companies with at least six months of trading and £100k a month of revenue. Outfund says there are no mandatory personal guarantees on funding of £10,000 to £500,000 over 3, 6, 9 or 12 months, from six months of trading and around £10,000 a month of revenue. Both read on their own sites on 7 September 2026.

Security is the other way out of it. 39 of the 55 unsecured lenders on our panel do not require the director to own a home, which changes what a guarantee is actually worth to them, while 38 asset finance lenders take the kit and 20 invoice finance providers take the receivables instead. Panel checked September 2026.

Things Directors Commonly Check and Negotiate

Guarantees are more negotiable than most people realise, particularly before signature. Points that come up in practice:

• A cap: asking for liability limited to a fixed sum rather than unlimited
• Scope: tying the guarantee to this facility only, not all future borrowing
• Reduction and release: the guarantee stepping down as the loan is repaid, with a clear end point
• Splitting between directors: several guarantee liability so each director covers a share, rather than joint and several where the lender can pursue any one of you for all of it
• Personal guarantee insurance: policies exist that cover part of the liability if a guarantee is called, with annual premiums typically 1 to 3% of the amount guaranteed. Cover levels and exclusions vary, so the policy wording matters as much as the guarantee wording

None of this list is advice, and guarantee documents are legal contracts with real teeth. Independent legal advice before signing one is a small cost against the size of the commitment, and some lenders require evidence of it anyway.

Common Questions

Can I get business funding without a personal guarantee?

Sometimes. Funding secured on assets or invoices leans less on guarantees, some merchant cash advances don't require one, and larger established companies can borrow on their balance sheet alone. For unsecured lending to smaller companies, expect to be asked.

Does a personal guarantee affect my personal credit file?

Signing one doesn't normally appear on your credit file. It becomes visible if it's called and enforcement follows, at which point judgments and defaults very much do.

My spouse co-owns our house. Are they affected?

Potentially, which is why lenders sometimes require the guarantee to be supported by a charge over jointly owned property, needing both owners' agreement. This is precisely the territory where independent legal advice for each person involved stops being optional.

If I sell the company, does my guarantee end?

Not automatically. A guarantee survives until the lender releases it, and departing directors have been caught by guarantees on facilities that continued after they left. Getting a written release on exit is one of those boring steps that matters enormously.

CapExpand Ltd (FRN 1060885) is an Appointed Representative of White Rose Finance Group Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 630772). We are a credit broker, not a lender. We do not provide financial advice.