Personal guarantees on business loans, explained
A personal guarantee is a legal promise that if your company cannot repay its borrowing, you will repay it personally. It sits outside the protection of the limited company: sign one, and that particular debt can follow you as an individual, into your personal savings and assets, even though the borrower on paper is the business.
Most unsecured lending to small UK companies comes with a personal guarantee requirement, so the practical question for most directors is not how to avoid one entirely, but how to understand and limit what they are signing.
What can a lender actually do under a personal guarantee?
If the company defaults and the lender calls the guarantee, the guarantor owes the outstanding amount personally. From there the lender has the same routes as with any personal debt: demand, negotiation, county court proceedings, and enforcement of a judgment. Where the guarantee is supported by a charge over property, the property itself can be at risk; where it is unsupported, the lender is pursuing you as an unsecured creditor, which still means court action and potentially bankruptcy proceedings for large sums.
The guarantee usually survives things directors assume would end it. Selling the company does not release you unless the lender agrees a release in writing. Resigning as a director does not release you either. The document, not your role at the company, decides when your liability ends.
What should I check before signing?
Guarantee documents vary between lenders, and several points are worth confirming in writing before signature. Independent legal advice is sensible for any large commitment, and some lenders require evidence of it.
- Is the guarantee capped at a fixed amount, or unlimited? Some lenders will agree a cap; an uncapped guarantee covers whatever the debt grows to, including interest and recovery costs.
- If more than one director signs, is liability "joint and several"? It usually is, which means the lender can pursue any one guarantor for the full amount, not just their share.
- Does it cover only this facility, or is it an "all monies" guarantee covering anything the company ever owes this lender?
- What exactly triggers a demand, and what notice do you get?
- How do you get released — on repayment, on refinance, on sale of the business?
What different lenders actually publish
Guarantee terms vary far more between lenders than rates do, and several publish theirs, which makes comparison possible before you apply rather than after. The numbers below were read from the lenders’ own product guides and pages on 7 September 2026.
- Shawbrook Bank publishes a 25% minimum personal guarantee on both commercial mortgages and buy-to-let, stated as a flat position.
- Redwood Bank splits it: 25% on commercial investment lending, but 100% on commercial owner-occupier or trading-company lending. On an owner-occupied purchase that is a very different exposure to Shawbrook’s flat 25%.
- Momenta Finance requires a personal guarantee on every loan it writes, including Growth Guarantee Scheme loans, and asks for guarantees from two homeowners on unsecured lending between £350,000 and £500,000.
- MT Finance states in its own FAQ that it takes no personal guarantees and does no credit scoring on its bridging lending, which is unusual to see in writing.
- Time Finance publishes that guarantees are discretionary on its Growth Guarantee Scheme asset finance, and that the scheme itself bars security over a principal private residence.
How to read a percentage guarantee
A 25% guarantee on a £400,000 facility is £100,000 of personal exposure, plus interest and costs where the deed says so, and it does not shrink as the loan is repaid unless the deed says that too. Read the cap, read whether it is capped at all, and read whether costs sit inside or outside the cap. Those three lines matter more than the headline percentage.
Run the same £400,000 through the published positions above and the spread is stark. At Shawbrook’s flat 25% the exposure is £100,000. At Redwood’s 25% on commercial investment it is also £100,000, but at its 100% owner-occupier position the same £400,000 loan carries £400,000 of guarantee. Four times the personal risk, on lending that may be priced within half a percent of the alternative.
Whether you own a home changes the shape of the question rather than removing it. 39 of our 55 unsecured lenders will proceed without a homeowning director and 17 of the 20 invoice lenders do the same (checked September 2026). A guarantee from someone with no property behind it is still an enforceable debt against their income and savings. It is not a formality because the guarantor rents.
Size changes who is asking, too. At £25,000 unsecured, 36 lenders on our panel have a product covering the amount; at £250,000 it is 35, and the larger the facility the more likely a guarantee is joint and several across every director rather than sitting with one (checked September 2026). Momenta, again as a published example, moves from one director guarantee up to £350,000 to two homeowning guarantors between £350,000 and £500,000.
We do not tell anyone whether to sign one. What we do is put the guarantee terms side by side with the pricing before an offer is accepted, because the cheapest rate on the table is regularly attached to the widest guarantee. Take independent legal advice on any deed before signing it; the lender still makes its own decision on the lending.
Which lending shapes usually come without a personal guarantee?
Three shapes of lending look first to something other than the director, and it is the structure of the product rather than any lender’s generosity that does the work. Invoice finance advances a percentage of each approved invoice, so the debtor’s ability to pay is the primary security. Asset finance is secured on the vehicle or machine being bought, which the funder can repossess and sell. Lending secured by a first charge on property has the property to fall back on. In each case a guarantee can still be asked for, often limited to a warranty that the invoices are genuine or to a shortfall on resale of the asset.
What our panel data can say about this is narrow. The criteria we hold record homeowner status, checked September 2026, but carry no field for whether a guarantee is taken, so we publish no count of guarantee-free lenders. MT Finance and Time Finance, quoted above from their own pages, are two published positions, and each lender decides case by case.
Capped or uncapped, with a worked example
Take a £150,000 unsecured loan over four years with two directors. An uncapped guarantee makes each director liable for whatever the company owes on the day of demand: the balance, arrears of interest, default interest where the agreement charges it, and the lender’s recovery costs. If the company fails in month 18 with £98,000 outstanding and £7,000 of default interest and costs, the demand is £105,000.
A guarantee capped at £75,000 limits the demand to £75,000 whatever the balance, unless the deed puts interest and costs outside the cap, which some do, so that line is the one to read twice. A cap is normally a fixed sum agreed at drawdown rather than a percentage that tracks the balance down. Whether a cap is offered at all is the lender’s decision, and on smaller unsecured facilities the deed is usually a standard form that is not negotiated.
What does a joint and several guarantee of £350,000 mean?
Suppose three directors each sign a joint and several guarantee of £350,000 for the same facility. Jointly, all three together owe the lender £350,000. Severally, each of them alone owes the lender £350,000. The lender chooses whom to pursue and is free to demand the full sum from the director with the most reachable assets while never approaching the other two.
That director then has a right of contribution against the co-guarantors, £116,667 each on an equal split, but recovering it is a separate claim at their own cost against people who may by then have little. A several-only guarantee, where each signatory is liable for a stated share, is a different document, and a side agreement between the three directors binds them to each other without touching the lender’s rights.
Are there personal guarantee loopholes?
None that survive contact with a court. A signed guarantee is a contract, and resigning, selling the shares, moving assets to a spouse or liquidating the company all leave it intact. Transfers made to put assets beyond a creditor’s reach can be unwound under section 423 of the Insolvency Act 1986, whether or not the transferor is insolvent at the time.
What does limit exposure is written into the deed before signature: a cap, a several rather than joint and several basis, a release on refinance or sale, and a time limit. After signature, the position is the one the first section on this page describes.
Personal guarantee insurance, and what it does not do
Personal guarantee insurance is a policy bought by the guarantor that pays a proportion of the sum demanded under the guarantee if the lender calls it. Several UK insurers write it; we name none, arrange none and are paid nothing for it. What to read: the percentage of the guarantee covered, which the policy sets; whether it rises in later years; the exclusions, which commonly include demands arising from fraud or from a guarantee signed before the policy started; and the annual premium, priced on the guarantee amount and the company’s risk. The insurer pays the guarantor, so the lender’s claim is unchanged and the guarantor is still the person served with the demand.
Secured lending changes the shape of the risk rather than removing it: a loan secured on a specific business asset may come with a smaller guarantee, or one limited to a shortfall, because the lender looks to the asset first. Whether that trade is preferable depends on the asset and the circumstances, and is a decision to take with your own legal and financial advisers.
Do all lenders require one?
Requirements differ by product and lender. Unsecured term loans to small limited companies usually require a guarantee from at least one director. Merchant cash advance agreements commonly include one as well, though practices differ between providers on scope and wording. Asset finance sometimes relies mainly on the financed asset. When comparing offers, the guarantee terms belong in the comparison alongside the cost: a cheaper facility with a broader guarantee is not automatically the better deal for the person signing it.
The panel behind this page
Through our broker network we place cases with a panel of 200+ UK lenders offering 1,800+ products, from high-street banks to specialist funds. Guarantee requirements differ across our unsecured panel of 55 lenders and the property panels (checked September 2026; panel composition changes over time). We check criteria first and approach only the lenders whose requirements you fit. The full roster, category by category, is published in our lender directory.
Frequently asked questions
What happens if my company cannot pay and I have signed a personal guarantee?
The lender can demand the outstanding amount from you personally. If it is not paid or renegotiated, the lender can take court action against you as an individual and enforce any judgment, and for large debts bankruptcy proceedings are possible. Where property was charged in support of the guarantee, that property can be at risk. The exact position depends on the wording of the guarantee you signed.
Does selling my company or resigning as director end my personal guarantee?
No, not by itself. A personal guarantee is a contract between you and the lender, and it continues until the debt is repaid or the lender releases you in writing. Anyone selling a business with outstanding guaranteed borrowing should deal with the release as part of the sale.
Can I get a business loan with no personal guarantee, or without one at all?
For a small limited company borrowing unsecured, rarely: the guarantee is what the lender falls back on when there is no asset. The shapes that can come without one are secured on invoices, equipment or property, and even there a shortfall or warranty guarantee is common. Our criteria data has no guarantee field (it records homeowner status, checked September 2026), so we publish no count of guarantee-free lenders.
Are there unsecured business loans with no personal guarantee in the UK?
Almost none for companies below the size where a lender can rely on audited accounts and a balance sheet. Unsecured means no charge over an asset, which leaves the director’s covenant as the only security, so the guarantee is the product. Momenta Finance, for example, publishes that it requires one on every loan it writes.
Are there personal guarantee loopholes?
No. Resignation, a share sale, moving assets to a partner and liquidating the company all leave a signed guarantee standing, and asset transfers designed to defeat the lender can be reversed under section 423 of the Insolvency Act 1986. The only levers are the ones agreed in the deed before signature: a cap, a several basis, a release trigger and a time limit.
Can a personal guarantee be capped or uncapped?
Either, and the deed says which. Uncapped means liability for the whole debt plus interest and costs on the day of demand. Capped means a fixed sum, often a percentage of the facility at offer stage converted to pounds at drawdown; a £150,000 loan with a £75,000 cap and costs outside it can still cost more than £75,000.
How do I cap a personal guarantee on a UK business loan?
A cap is agreed with the lender before the deed is signed, not after. Some products carry one as standard, Shawbrook’s published 25% on commercial mortgages for example; on larger facilities it is one of the terms on the table alongside rate and fees, and on small unsecured loans the deed is usually take-it-or-leave-it. A solicitor reviewing the deed will tell you which kind you have.
What does a joint and several personal guarantee of £350,000 mean?
That the lender can demand the whole £350,000 from any one signatory, without first asking the others or splitting it. With three guarantors, one can be pursued for £350,000 while two are left alone, and the one who pays must recover £116,667 from each of the others through a claim of their own.
Can I negotiate a personal guarantee cap on a UK business loan in 2026?
On larger facilities, yes: at £250,000 unsecured 35 lenders on our panel have a product covering the amount (checked September 2026), and at that size a cap, a step-down as the balance falls, or a release on refinance are all things a lender may agree. On a £25,000 loan the document is usually standard, and the lender decides what it will accept.
Is CapExpand FCA regulated?
CapExpand Ltd is not directly authorised by the Financial Conduct Authority. 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). That appointment means White Rose Finance Group Limited is responsible for our credit broking, and both firms appear on the Financial Services Register at register.fca.org.uk. We are a credit broker, not a lender.
Sources
Guarantee positions were read from each lender's own published pages and product guides on 7 September 2026 and change without notice; the worked examples are illustrations, checked 8 September 2026.
- Shawbrook Bank: commercial mortgages and personal guarantee position
- Redwood Bank: commercial lending criteria
- Momenta Finance: personal guarantee wording
- MT Finance: bridging criteria and FAQ
- British Business Bank: Growth Guarantee Scheme
- Insolvency Act 1986, section 423: transactions defrauding creditors
Comparing offers with different guarantee terms?
We set out the guarantee position alongside the cost for every introduction, in writing.
You speak to a person who looks at your numbers; nothing is submitted anywhere until you say so.
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