Personal Guarantee Insurance
Personal Guarantee Insurance
If your finance application depends on you giving a personal guarantee and you want to protect yourself, there are options. Personal guarantee insurance is available and can be used to shield you from a large proportion of the liability.
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Personal Guarantee Insurance
What is a Personal Guarantee?
A personal guarantee is an assurance that you will personally repay a source of business credit in the event of the business failing to do so. This means that if your business fails to pay, then you are personally liable for that debt. Whereas limited company law states that in the event of liquidation, the former directors and shareholders cannot be pursued, a personal guarantee completely changes that. You are personally creating a relationship between yourself and the lender. This means that if your business was liquidated, you are still tied to the debt.
When are they Required?
Personal guarantees are required to support most business borrowing applications where the owners of the business benefit from limited liability, such as LLPs and Ltd companies.
Why do Lenders Request a PG?
By asking for a personal guarantee, the lender is reducing their risk of losing money. If they have a personal relationship with you, rather than just with the business, they increase the chances of being repaid in full.
This increased security strengthens the lender’s position, which of course is a positive for them.
Do all Lenders Require a Personal Guarantee?
When is a Personal Guarantee Called Upon?
Personal guarantees are called upon in the event of the company failing to keep up the repayments on the loan. Much like a guarantor for a personal loan, there is no payment to make personally unless the main borrower defaults.
Personal Guarantee Insurance
Personal guarantee insurance is available and can be used to shield you from a large proportion of the liability.
This means that in the event that the PG is called on by the lender, the insurance policy will pay out to ensure you do not suffer financially. There is a cost associated with personal guarantee insurance, and this must be considered carefully before taking this route.
APPLY NOW >
A personal guarantee is an assurance that you will personally repay a source of business credit in the event of the business failing to do so. This means that if your business fails to pay, then you are personally liable for that debt. Whereas limited company law states that in the event of liquidation, the former directors and shareholders cannot be pursued, a personal guarantee completely changes that. You are personally creating a relationship between yourself and the lender. This means that if your business was liquidated, you are still tied to the debt.
When are they Required?
Personal guarantees are required to support most business borrowing applications where the owners of the business benefit from limited liability, such as LLPs and Ltd companies.
Why do Lenders Request a PG?
By asking for a personal guarantee, the lender is reducing their risk of losing money. If they have a personal relationship with you, rather than just with the business, they increase the chances of being repaid in full.
This increased security strengthens the lender’s position, which of course is a positive for them.
Do all Lenders Require a Personal Guarantee?
Most business lenders will require a personal guarantee. Finding a lender who is happy to lend to a company without the need for a PG is rare and may restrict your borrowing options.
Personal guarantees are called upon in the event of the company failing to keep up the repayments on the loan. Much like a guarantor for a personal loan, there is no payment to make personally unless the main borrower defaults.
When in default, the personal guarantee will be called upon. In the event of the PG being called upon, you must settle the debt, whether that is done personally, through the business, or through any other means.
Personal guarantee insurance is available and can be used to shield you from a large proportion of the liability.
This means that in the event that the PG is called on by the lender, the insurance policy will pay out to ensure you do not suffer financially. There is a cost associated with personal guarantee insurance, and this must be considered carefully before taking this route.
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Equinox
Equinox Commercial Finance Ltd (FRN: 841410) are Credit Brokers and Appointed Representatives of White Rose Finance Group Ltd (FRN: 630772) Authorised and Regulated by the Financial Conduct Authority. PLEASE MAKE BORROWING DECISIONS CAREFULLY, PROPERTY OR OTHER ASSETS OFFERED AS SECURITY MAY BE AT RISK IF YOU CANNOT KEEP UP WITH REPAYMENTS.