A personal guarantee is one of the most consequential documents a business owner will ever sign, and it is frequently signed with the least attention. It is often presented near the end of a funding process, as a condition of drawdown, at a point where everyone wants the money released.
If a lender has asked you to take independent legal advice before signing, that is a good thing. It is a chance to understand exactly what you are agreeing to while you still have the option not to.
What a personal guarantee does
A personal guarantee is a promise by an individual to be personally responsible for someone else's debt — almost always a company's.
The critical point is this: a limited company exists partly to separate your personal finances from the business. A personal guarantee deliberately removes that separation for the debt it covers. If the company cannot pay, the lender comes to you personally, and it can pursue your income, your savings, and — if the guarantee is secured — your home.
Who is typically asked to sign
- Company directors, particularly of newer or smaller companies
- Majority shareholders
- Spouses or partners of directors, where the lender wants security over a jointly owned home
- Individuals guaranteeing a commercial lease for a company tenant
Lenders and landlords ask for guarantees when they doubt the company alone is good for the money. That is worth registering: a guarantee request is itself a statement about perceived risk.
The clauses that cause the most trouble
Guarantees are not standard documents. The differences between them matter enormously. These are the provisions we look for first.
"All monies" wording
An all-monies guarantee covers not just the current facility but any sums the company owes the lender, now or in the future. You could be guaranteeing borrowing that does not yet exist and that you may not be consulted about.
Joint and several liability
Where several directors guarantee the same debt, joint and several liability means the lender can recover the entire amount from any one of you. It does not have to split it evenly or pursue everyone equally. In practice lenders pursue whoever is most able to pay — which may well be you, regardless of your shareholding.
No requirement to pursue the company first
Many guarantees are drafted as primary obligations, meaning the lender can demand payment from you without first exhausting its remedies against the company. People often assume the lender must try the business first. Frequently, it does not.
No cap on liability
Some guarantees are capped at a stated figure. Many are not, and may extend to interest, default interest, and the lender's legal costs of enforcement.
Difficulty in getting out
Guarantees often continue after you resign as a director or sell your shares. Release usually requires the lender's written consent, which it has no obligation to give. We have seen people liable for years on companies they left long ago.
Security over your home
Where the guarantee is supported by a charge over your property, the consequences of default move from financial to domestic. This is also where the Etridge principles bite — see below.
Where a spouse or partner is asked to guarantee
If you are being asked to guarantee borrowing for a business you have no involvement in — typically your partner's — the position is different, and the law recognises it.
Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44 addressed exactly this: someone in a non-commercial relationship with the borrower, offering security or a guarantee, receiving no direct benefit, and potentially subject to pressure they would not admit to.
The lender must ensure you take independent advice, and the solicitor must see you alone — without your partner present — and explain the risk in plain terms.
If this is your situation, be candid with us in the appointment. Anything you tell us is confidential, and nobody else will hear it. If you feel unable to say no, that is precisely the situation the requirement exists to catch.
What we cover in the appointment
The amount at risk. The headline figure, plus interest, default interest and enforcement costs — the real number, not the one on the front page.
Whether liability is capped, and if so at what.
Whether it is joint and several, and what that means for you specifically.
Whether the lender must pursue the company first.
What triggers a demand. Formal insolvency, or a missed payment? The threshold is often lower than people expect.
What can be enforced against. Income, savings, investments, property. Whether your home is charged.
How the guarantee ends — and how it does not.
Whether the risk is proportionate to what you get out of it. That is a commercial judgment, and it is yours — but we will make sure you can see it clearly.
Whether anything can be negotiated. Sometimes nothing can. Sometimes a cap, a time limit, or removal of all-monies wording is achievable — particularly before you have signed. Once signed, your leverage is gone.
The process
1. Contact us with your timescale. 2. Send documents — the guarantee, facility letter or loan agreement, any security documents, and the lender's ILA requirement. 3. We review in advance. 4. ID verification. 5. Appointment — 45–60 minutes, video or in person, and alone. 6. Your decision. 7. Certificate issued to the lender's solicitor. 8. Written confirmation of the advice given.
Typical turnaround: 2–5 working days. Urgent matters can often be accommodated.
Fees
| Service | clear fee | VAT | Total |
|---|---|---|---|
| Personal guarantee ILA (single guarantor) | clear fee — please contact us for a quote | clear fee — please contact us for a quote | clear fee — please contact us for a quote |
| Additional guarantor, same facility | clear fee — please contact us for a quote | clear fee — please contact us for a quote | clear fee — please contact us for a quote |
| Guarantee plus charge over property | clear fee — please contact us for a quote | clear fee — please contact us for a quote | clear fee — please contact us for a quote |
| Complex / multiple facilities | clear fee — please contact us for a quote | clear fee — please contact us for a quote | clear fee — please contact us for a quote |
clear fee agreed before we begin.
Frequently asked questions
Can I negotiate the guarantee? Sometimes. Caps, time limits and removal of all-monies wording are all negotiable in principle, and lenders occasionally agree — particularly where the company is otherwise strong. Your leverage exists only before you sign. Raise it early.
What happens if the company goes into liquidation? The guarantee survives. Liquidation of the company does not discharge you. In fact, insolvency is normally the event that triggers the demand.
I resigned as a director. Am I still liable? Very possibly yes. Resigning does not automatically release you. You need the lender's written release, and you should check the position for any guarantee you have ever given.
Can they take my house? If the guarantee is secured by a charge over your property, the lender can seek possession and sale. If it is unsecured, the lender must first obtain a judgment, but it can then apply for a charging order over property you own. Unsecured does not mean your home is beyond reach — it means there are more steps.
My spouse is the director and I am being asked to sign. Should I? Take advice first, and be honest with us about how you feel. This is exactly the situation Etridge was decided about. You are entitled to understand the risk and to decline.
Does independent legal advice protect me from liability? No, and this is important. The advice ensures you understand what you are signing. It does not reduce the liability itself. If you sign and the company defaults, the guarantee is enforceable.
How long is the certificate valid? Lenders generally expect recent advice, often within three months. If your facility is delayed, check with the lender.
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