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. This guide is not written to put you off. It is written so you know precisely what you are 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 is part of why lenders are willing to lend unsecured to small companies at all.

Limited vs Unlimited: Read This Clause Twice

• A limited guarantee caps your liability at a fixed amount or a percentage of the loan. Each lender sets the share of the facility it asks the guarantee to cover, from a percentage to 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 point is simpler: a guarantee for an amount you could not survive paying is a commitment to read twice, and a business failing is never impossible. Every director who has had a guarantee called assumed it was.

Who asks for one

Unsecured lenders commonly ask for a guarantee from a director, and some state on their own pages that every unsecured product carries one. Where a lender publishes that it takes no mandatory guarantee, read the rest of its terms alongside that line: the trading and turnover minimums, the term and the price are where the difference shows.

Security is the other way out of it. Each unsecured lender publishes its own criteria on whether the director owns a home, which changes what a guarantee is actually worth to them, while an asset finance lender takes the kit and an invoice finance provider takes the receivables instead.

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 of that kind exist and are a matter for the insurer and your own adviser; we do not arrange insurance

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, 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 a credit broker and an Appointed Representative of White Rose Finance Group Limited (FRN 630772), which is directly authorised and regulated by the Financial Conduct Authority. We are a broker, not a lender. We work with UK limited companies and LLPs only, for business and commercial purposes. We do not provide financial advice.