Do I need to provide a personal guarantee for a business loan?

Often, yes. Many UK SME loans and credit lines require a director’s personal guarantee unless strong asset security or financial strength makes it unnecessary.

What is a personal guarantee?

A personal guarantee is a legal promise by a director or owner to repay the facility if the company cannot. It creates personal liability and can lead to enforcement if unpaid.

What types of security can lenders take?

Common forms include fixed charges on assets, floating charges over stock and receivables, all-assets debentures, corporate guarantees, and cash deposits. The mix depends on the facility and risk.

Can I get finance without a personal guarantee?

Yes, in some cases. Asset finance, invoice finance, or asset-based lending may proceed without a PG if security coverage and financial performance are strong.

Does the Growth Guarantee Scheme (GGS) affect guarantees?

Lenders may take personal guarantees under the GGS, but they cannot take security over your principal private residence. Final terms depend on the provider’s policy.

How can I reduce or limit a PG?

You may negotiate caps, time limits, shared guarantees among directors, or offer additional asset security. PG insurance can also reduce exposure, subject to policy terms.

What documents will lenders want?

Expect accounts, recent management information, cash flow forecasts, bank statements, debtor and creditor reports, asset lists, and KYC details for directors.

Do I need to provide a personal guarantee or other security?

Short answer: often, yes — but it depends on the lender, the loan type, the amount, and the strength of your business. Many UK SME facilities require a personal guarantee (PG) or asset security, while some asset-backed or strongly performing companies can secure funding without one.

When lenders ask for guarantees or security

Lenders use guarantees and security to reduce risk and improve affordability of terms. The smaller, newer, or riskier your business, the more likely a PG or asset security will be requested.

As facility sizes rise or trading is volatile, expect security to increase. Strong balance sheets, clear profitability, and tangible assets can reduce or remove PG requirements.

Typical triggers for a personal guarantee

Limited trading history, thin profits, or weak credit scores.
Unsecured term loans, revolving credit, or overdrafts without hard collateral.
Cyclical sectors, high default risk, or stressed cash flow.
Higher facility amounts, rapid growth, or past credit issues.

Common situations where a PG may not be required

Asset finance with strong resale value (e.g., machinery or vehicles).
Invoice finance where debtor quality is strong and concentration is low.
Well-capitalised, profitable companies with robust security coverage.
Facilities backed by adequate additional collateral or cash deposits.

Product snapshots: likelihood of guarantees and security

Unsecured term loans: PG commonly required for SMEs.
Asset finance and leasing: security on the asset; PG may be limited or waived.
Invoice finance: assignment of receivables and often a debenture; PG varies.
Merchant cash advance: PG is common, though terms vary by provider.
Revolving credit/overdrafts: PG likely unless strong security exists.

Government-backed schemes can influence security policy. Under the British Business Bank’s Growth Guarantee Scheme (GGS), lenders may request PGs but cannot take security over your principal private residence.

Types of security in UK business finance

In UK commercial lending, “security” means assets the lender can claim if the facility is not repaid. The goal is to create a second line of protection beyond business cash flow.

Security can be personal or corporate, fixed or floating, single-asset or all-assets. The structure affects risk, pricing, and speed of approval.

Personal guarantees explained

A personal guarantee is a legally binding promise from a director or shareholder to repay if the company cannot. It is usually not secured against a home but can still put personal assets at risk if enforced.

PGs can be joint and several, meaning each guarantor could be pursued for the full outstanding balance. Some lenders may accept a capped or limited PG to share risk.

Fixed charges, floating charges, and debentures

A fixed charge is security over a specific asset, such as a vehicle or machine. If you default, the lender can take possession or appoint a receiver for that asset.

A floating charge covers classes of assets like stock or receivables that change over time. On default, it can crystallise into a fixed charge.

Debentures and all-assets security

A debenture typically includes a mix of fixed and floating charges over the company’s assets. It gives the lender strong control rights if the company defaults.

All-assets debentures are common in invoice finance, asset-based lending, and larger revolving facilities. They can reduce or remove the need for a PG if asset cover is robust.

Other forms include corporate guarantees, cash deposits, or insurance-backed undertakings. Each option has different costs and operational impacts.

Can I get funding without a personal guarantee?

It is possible, but it depends on the funding type and your risk profile. Lenders remove PGs when the underlying collateral or financial strength is sufficient.

The trade-off is usually tighter covenants, lower leverage, or a higher cost if risk remains. A blended approach — modest PG plus asset security — is also common.

Products more likely to avoid a PG

Hire purchase and finance leases, when the asset has strong resale value.
Invoice discounting with strong debtor books and low disputes.
Asset-based lending secured on plant, machinery, receivables, and stock.
Trade finance with letters of credit or inventory control.

Who typically qualifies for no-PG finance?

Established companies with steady profits and positive net assets.
Businesses with diversified customers and low debtor concentration.
Firms with auditable accounts, strong cash generation, and low leverage.
Businesses offering additional corporate collateral or cash security.

Sector snapshot: asset-backed routes

Manufacturers, logistics firms, and equipment-heavy businesses can often lean on asset finance. Invoice finance can suit B2B services with reliable debtors and documented terms.

For example, printing businesses seeking finance may secure funds against presses, cutters, or trade receivables. In each case, security quality influences whether a PG is needed.

For government-backed facilities, lenders set security in line with their standard policy. Your principal private residence should not be used as security under the GGS.

How to reduce, manage, or negotiate a personal guarantee

Guarantees are negotiable, especially when your position is strong. Present alternatives and rationale, not just a refusal.

Demonstrate how security cover and visibility reduce lender risk. That helps unlock caps, carve-outs, or time limits on PGs.

Practical negotiation levers

Limit the PG amount or tie it to a reducing balance over time.
Set a time limit, releasing the PG after agreed milestones.
Share the PG among directors to distribute exposure.
Offer additional asset security or a modest cash deposit.
Provide management accounts, forecasts, and MI to reduce uncertainty.

Personal guarantee insurance

PG insurance can partially protect directors if the guarantee is called. It usually covers a percentage of the liability, subject to policy terms.

Premiums depend on sector risk, facility size, and financial performance. Check exclusions, limits, and claims processes before relying on it.

What happens if a guarantee is called?

If the company defaults, the lender may demand repayment from guarantors. You could face legal action, CCJs, or enforcement if unpaid.

Ultimately, courts can grant charging orders over personal assets. Seek independent legal advice before signing any guarantee.

What lenders check and how to prepare

Preparation can reduce or remove PG requirements and improve outcomes. Lenders want assurance over repayment, security, and governance.

Transparent, accurate information speeds decisions and improves terms. Aim to answer risk questions before they are asked.

Documents and data checklist

Last two years’ statutory accounts and recent management accounts.
12–24 month cash flow forecast with assumptions.
Business plan or funding rationale, use of funds, and ROI case.
Asset lists with ages, serial numbers, and estimated values.
Debtor and creditor ledgers, ageing reports, and concentrations.
Bank statements, facility statements, and existing security schedules.
Directors’ details for KYC and, if relevant, PG assessment.

Fast next steps with Best Business Loans

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Important information and fair, clear disclosure

Best Business Loans is an independent introducer, not a lender. We help you find relevant commercial finance providers in the UK.

Eligibility, rates, security, and PG requirements are set by providers. A personal guarantee creates personal liability and may affect your personal finances if called.

Under the Growth Guarantee Scheme, lenders may take PGs, but your principal private residence cannot be taken as security. Information here is general and not advice; consider independent legal and financial advice.

Key takeaways

Many SME facilities require a personal guarantee or other security.
Strong assets or financials can reduce or remove PG requirements.
You can often negotiate PG caps, time limits, or share liability.
PG insurance can mitigate risk but rarely covers 100%.
A clear funding case and full documentation improve your options.

Updated: October 2025

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