Are personal guarantees or other security required?
Short answer
Whether personal guarantees or other security are required depends on the lender, the type of finance, and your company’s financial strength. Some loans and facilities will require security or director guarantees, while others can be provided unsecured or with asset-backed terms. Best Business Loans helps you understand which lenders typically ask for guarantees and how to reduce or manage that requirement.
What do we mean by security and personal guarantees?
“Security” is any asset a lender can take or place a charge over if the borrower defaults, such as plant, vehicles, stock, invoices or property. Security can be fixed (attached to a specific asset) or floating (covers a changing pool of assets such as stock or receivables).
A personal guarantee is a legally binding promise made by an individual — usually a director or business owner — to repay business debt if the business cannot. Guarantees can be limited (capped to a set sum) or unlimited and may extend to directors’ personal assets like homes and savings.
Understanding the difference is critical because an asset charge affects company balance sheets differently to a director’s personal liability. Both forms of security increase lender confidence but carry distinct legal and financial consequences for the business and its owners.
Which types of business finance commonly require security or guarantees?
Asset finance and equipment loans are often secured against the financed asset itself, so the lender’s primary security is the item you purchase. For many asset finance deals the asset acts as the main security, reducing the need for extensive additional guarantees.
Invoice finance and asset-based lending usually place a charge over receivables and stock, and some providers may ask for director guarantees depending on the client’s credit history. High-risk cashflow loans or larger facilities for newer businesses are more likely to require personal guarantees or additional security.
Unsecured business loans and some merchant cash advances advertise no security, but prices and criteria reflect higher risk for lenders. Government-backed schemes and grant-based support can carry fewer personal guarantee demands, though scheme rules vary and eligibility criteria still apply.
For targeted asset finance options see our dedicated page: Asset Finance, which explains how asset-backed deals commonly work and when extra guarantees might be asked for.
How personal guarantees work and their legal implications
A personal guarantee typically obliges the guarantor to meet the debt if the business cannot; lenders may pursue personal assets once corporate remedies are exhausted. The guarantee can be conditional (only triggered on default) or unconditional, and it may include a cross-guarantee across multiple facilities.
Directors should understand how guarantees interact with insolvency laws and creditors’ rights. Signing an unlimited guarantee can expose personal property to risk and affect future borrowing, mortgages and personal credit scores.
Legal documents may include indemnities, guarantees and security agreements; each clause matters. Seek independent legal and financial advice before signing: the commitment can be long-lasting and enforceable even if you later leave the business or sell shares.
Ways to reduce or avoid guarantees and security
Improve your business position to reduce the likelihood of guarantees: strengthen cash flow, provide up-to-date management accounts, and increase the deposit or equity contribution. Lenders assess risk, so clearer historic performance and a demonstrable repayment plan can make them more flexible.
Negotiate terms: ask for limited guarantees, sunset clauses that remove personal liability after steady performance, or partial guarantees capped at a fixed amount. Some lenders accept director guarantor insurance, escrow arrangements or additional business assets in place of personal property.
Work with an experienced broker or the Best Business Loans platform to present your case to lenders who specialise in your sector. Brokers can often match you with providers who do not usually require personal guarantees or who offer more borrower-friendly structures.
Practical steps, checklist and how Best Business Loans helps
Before you apply, gather key documents: management accounts, bank statements, cashflow forecasts, asset lists and any existing finance agreements. Prepare a short note explaining the purpose of funds and how they will improve business cash flow or profitability.
Ask lenders early about their security and guarantee policies: get clear written explanations on when a guarantee is triggered, whether it is capped, and if there are release conditions. Compare offers not only on headline rates but on security requirements, covenants and exit terms.
Best Business Loans does not provide finance directly but uses AI-driven matching to introduce you to lenders and brokers who are a close fit for your needs. Submit a Quick Quote and our system will match you with providers that suit your finance type, sector and risk profile. This saves time and clarifies which facilities are likely to require personal guarantees or other security.
Key takeaways
- Security and personal guarantees depend on lender risk appetite, loan type and company strength.
- Asset-backed finance often relies on the asset itself, while unsecured borrowing usually carries higher costs or stricter covenants.
- Director guarantees can be limited or unlimited and carry real personal risk; seek legal advice before signing.
- It is often possible to negotiate caps, release conditions or alternative securities to reduce personal exposure.
- Use Best Business Loans to compare matched lenders quickly and discover options that minimise personal guarantees.
Frequently asked questions
Do all business loans require a personal guarantee?
No. Many lenders provide unsecured small-business loans or asset finance secured purely on the asset itself. However, higher-value facilities or businesses with limited trading history are more likely to face guarantee requests. Always check the lender’s written terms.
Can I limit my liability on a personal guarantee?
Yes. You can negotiate a limited guarantee capped at a specific sum, a time-limited guarantee or release clauses linked to performance milestones. Lenders are sometimes willing to agree to graduated release conditions where the guarantee reduces as the business proves performance.
About Best Business Loans
Best Business Loans is an independent UK introducer using AI and a network of lenders and brokers to help established businesses explore finance options. We do not lend and we do not give regulated advice; instead, we match you to appropriate lenders so you can compare clear offers.
Our process takes minutes to start and keeps you in control of decisions. Submit a Quick Quote for a Decision in Principle or eligibility check, and receive introductions to lenders who fit your business profile.
For impartial guidance, or if you need help preparing paperwork before applying, contact hello@bestbusinessloans.ai or use the Quick Quote form on our site. Completing a Quick Quote does not commit you to borrowing and helps identify providers likely to require security or guarantees.