Will I need to give a personal guarantee or additional security?
Short answer
Possibly. Whether you must provide a personal guarantee (PG) or additional security depends on the lender, the type of finance, your company’s financial profile, and the assets available to secure the loan.
Some lenders accept business-only security, while others—especially for higher risk or smaller-lender deals—commonly ask directors for personal guarantees or further collateral.
What a personal guarantee and additional security actually mean
A personal guarantee is a legal promise by an individual—usually a director or owner—to repay the loan if the business cannot.
Additional security means assets or rights pledged to the lender, such as business equipment, property, stock, or a corporate charge over company assets.
Both PGs and security increase lender confidence and typically improve the chances of approval or secure better commercial terms.
However, they transfer downside risk from the lender to the guarantor and can have serious personal consequences if a business fails.
It is important to understand whether a guarantee is unlimited, limited in amount, time-limited, or capped to specific circumstances.
Common forms of guarantees and security lenders request
Personal guarantees vary: unlimited personal guarantees make the guarantor fully liable, while limited guarantees cap the liability to a fixed sum or period.
Fixed charges secure a specific asset (for example, a machine), while floating charges cover a changing pool of assets like stock and receivables.
Debentures combine several security elements and are common for larger facilities; they often include both fixed and floating charges.
Asset finance normally takes a lien or charge over the financed equipment, allowing the lender to repossess it on default.
In some cases lenders will accept a director’s indemnity, personal property security, or a charge over residential property, depending on risk appetite and legal permissibility.
When lenders prefer guarantees
Start-up risk, weak trading history, thin asset coverage, or poor credit records increase the chance a lender will ask for a PG or extra security.
Where a business has limited tangible assets, lenders often use director guarantees to close the gap between perceived risk and acceptable exposure.
Which finance types commonly require guarantees or security
Secured lending such as commercial mortgages, asset finance, and invoice finance often involves specific security arrangements.
Unsecured business loans can still attract PGs from smaller lenders or where the borrower’s credit profile is considered risky.
Equipment finance frequently uses the equipment as the primary security, but lenders sometimes ask for a director guarantee to strengthen the file; see our equipment finance guide for details.
Invoice finance and asset-based lending often use charges over receivables and stock, and larger funders may require a debenture and director guarantees.
Short-term cashflow facilities and merchant cash advances may include personal guarantees depending on the underwriting model used by the provider.
How guarantees affect directors and how to manage the risk
A PG can put personal assets—such as savings or a home—at risk if the company defaults and the guarantor is pursued legally.
Directors should negotiate the terms: cap the guarantee, time-limit it, exclude certain personal assets, or attach a sunset clause when business performance targets are met.
Seek legal advice before signing. A solicitor can explain potential enforcement scenarios, bankruptcy implications, and ways to reduce exposure.
Consider obtaining director indemnity insurance or negotiating an alternative such as higher interest, shorter terms, or third-party security in place of a PG.
Document all negotiations in writing and request a clear statement from the lender on when and how a guarantee can be enforced.
Practical steps, what Best Business Loans can do for you, and next actions
Step 1: Be prepared — lenders will review accounts, cashflow forecasts, asset registers, and credit histories before deciding on guarantees.
Step 2: Disclose what you can offer and ask if the lender will accept corporate-only security or require director backing.
Step 3: Compare options — different lenders and brokers have varying tolerance for unsecured lending and differing approaches to guarantees.
Best Business Loans helps UK businesses identify lenders or brokers more likely to accept the security terms you prefer.
By completing a Quick Quote you can get an eligibility check and an introduction to providers that match your profile and risk appetite.
We do not supply loans directly; we introduce you to lenders and brokers who may ask for guarantees or security in line with their policies.
Before agreeing to any guarantee, seek professional legal and financial advice and ensure any promotional claims are clear, fair and not misleading.
Ready to see your options? Submit a Quick Quote and receive a Decision in Principle or eligibility check to understand likely security requirements for your case.
Short FAQs
Q: Can I avoid a personal guarantee? A: Sometimes—if your company has strong accounts, substantial assets, or access to alternative security, lenders may waive PGs.
Q: Can a PG be removed later? A: Yes; many guarantors negotiate release clauses that apply when the business hits agreed performance triggers or refinances without personal backing.
Important note: Best Business Loans is an introducer and not a lender, broker or regulated financial adviser. This page is for general information only and is not financial advice. Consider legal and professional guidance before signing guarantees.
Ready to check your options? Use our Quick Quote to obtain a free eligibility check and potential Decision in Principle from lenders and brokers matched to your business needs.