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

Often yes for unsecured facilities to limited companies and LLPs. Asset-backed options (e.g., equipment, vehicles, invoice finance) can reduce or remove the need, depending on strength of the asset, trading performance, and the lender’s policy.

What types of security can lenders require?

Common forms include personal guarantees, fixed charges over specific assets, floating charges/debentures over wider assets, asset-backed facilities, cash deposits, and third-party guarantees.

Is my home at risk if I sign a personal guarantee?

A personal guarantee is not automatically secured on your home, but if the business defaults and the debt is enforced through the courts, personal assets can be at risk. Some schemes and lenders restrict taking a charge over a principal private residence. Always seek independent legal advice.

Can I cap or split a personal guarantee?

Yes. Many lenders consider capped guarantees, step-downs over time, or splitting liability among multiple directors. All limitations must be expressly documented in the final agreement.

Does invoice finance require a personal guarantee?

Some providers request limited guarantees, while others rely primarily on the debtor book and credit insurance. The decision depends on ledger quality, concentration risk, and provider policy.

A debenture is a registered charge over a company’s assets, often comprising fixed and floating charges. It offers lenders recourse to business assets and may limit your ability to obtain further unsecured borrowing.

How can I reduce or avoid a personal guarantee?

Offer stronger business security, choose asset-backed facilities, reduce loan size or term, and provide up-to-date financials and contract evidence. Explore capped guarantees, split liability, and PG insurance.

Do government-backed schemes remove the need for PGs?

Not necessarily. Personal guarantees can still be requested, although scheme rules may restrict taking a charge over a principal private residence. Requirements vary by lender and scheme iteration.

Does Best Business Loans provide finance directly?

No. Best Business Loans is an independent introducer. We use AI matching and a professional network to connect you with suitable lenders or brokers. Submitting a Quick Quote is free and without obligation.

Who can apply via Best Business Loans?

Our platform supports established UK limited companies and LLPs across sectors such as construction, manufacturing, logistics, healthcare, and more. We do not currently support start-ups, sole traders, franchises, property finance, or commercial mortgages.

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

Short answer: often yes — it depends on the facility, lender, and your business profile

Many UK lenders will ask company directors or partners to provide a personal guarantee (PG) on unsecured business finance, especially for limited companies and LLPs. For asset-backed facilities (like equipment, vehicles, invoice finance) or where your business has strong financials, a PG may be reduced, capped, or sometimes not required. Requirements vary by lender, loan type, loan size, trading history, sector risk, and credit profile — so the best approach is to assess your situation and compare options before you commit.

What counts as “security” on a business facility?

Personal Guarantee (PG): a promise from an individual (usually a director) to repay if the business cannot.
Fixed charge: a lender’s legal claim over a specific asset (e.g., a machine or vehicle).
Floating charge/debenture: a wider claim over business assets (e.g., stock, receivables, equipment), often registered at Companies House.
Asset-backed facility: funding secured primarily against invoices, equipment, vehicles, or other assets.
Cash security or deposit: cash held by the lender as collateral.
Third-party guarantee: a separate guarantor (director, shareholder, or related business).

When is a personal guarantee likely to be requested?

Unsecured term loans and revolving credit for limited companies and LLPs.
Early-stage trading (e.g., under 2–3 years), thin or volatile profits, or limited net assets.
Larger loan sizes relative to turnover, or higher-risk sectors.
Where adverse credit, CCJs, or missed payments appear on personal or business files.

Best Business Loans doesn’t lend or advise; we introduce you to relevant providers and brokers so you can compare what’s realistic for your situation. Complete a Quick Quote to see options without obligation.

How lenders decide on PGs, charges, and other security

Lenders assess the likelihood of repayment and the fallback if your business cannot repay. The stronger the business (profitability, cash flow, tangible assets, order book), the less reliance there is on personal guarantees. Unsecured borrowing relies more on director PGs because there is no asset the lender can recover to limit losses.

Key factors lenders consider

Trading history and financial strength: time in business, profitability, margins, cash generation, and net assets.
Loan purpose and term: working capital, growth, acquisition, or refinance, and whether the benefit outlasts the term.
Loan size vs turnover: larger facilities relative to revenue can bring stronger security requirements.
Sector and concentration risk: cyclical industries or single-customer dependency often attract tighter covenants.
Business and personal credit files: payment history, utilization, CCJs, and director credit standing.
Existing security: prior debentures, asset finance liens, or partial charges already registered.

Unsecured vs asset-backed examples

Unsecured cashflow loan: typically requires a director PG, sometimes capped or with multiple directors sharing liability.
Asset finance (equipment/vehicle): usually secured on the asset; a PG may be reduced or waived for strong cases.
Invoice finance: secured on receivables with robust controls; PGs may be limited or not required by some providers.
Revolving credit facility: frequent PGs, though some lenders rely on debentures for added comfort.

Important note on government-backed schemes

Under government-backed frameworks such as the British Business Bank’s Growth Guarantee Scheme, lenders may still request personal guarantees, but scheme rules can restrict taking a charge over a principal private residence. Requirements vary by lender and scheme iteration, so check the current terms and seek independent advice.

If negotiating is possible, lenders might consider a smaller amount, a shorter term, or additional business security to reduce the PG exposure. Independent legal advice is commonly required before signing a guarantee.

Types of security in more detail — and what they mean for you

Knowing how each type of security works helps you decide what you’re comfortable with before applying. It also helps you prepare alternatives if you want to reduce or avoid a personal guarantee. Below is a plain-English overview of the main options.

Personal Guarantee (PG)

Nature: a legal commitment by an individual to repay if the business defaults.
Scope: can be “joint and several” across multiple directors, meaning each can be pursued for the full balance.
Caps and carve-outs: some lenders allow capped guarantees, step-downs over time, or liability limited to a percentage.
Practical risk: while a PG may not initially be tied to your home, court enforcement can extend to personal assets if the debt remains unpaid.

Debenture (fixed and floating charges)

Debenture: a lender’s security over a company’s assets, often registered at Companies House.
Fixed charge: on identifiable assets (e.g., a press, CNC machine), giving priority over sale proceeds.
Floating charge: over shifting assets (e.g., stock), which can crystallise on default.
Impact: may restrict your ability to obtain further unsecured borrowing without a lender’s consent.

Asset-specific security

Equipment and vehicle finance: the lender takes title or a charge over the asset; PGs may be reduced for prime cases.
Invoice finance: advances secured on your receivables; providers assess debtor quality and concentration risks.
Refinance: releasing equity from owned assets to fund new projects can reduce the need for PGs.

Other forms of comfort

Cash deposit: less common, but some lenders offset risk with a held deposit or blocked account.
Third-party guarantee: an owner or related company may guarantee; legal advice is recommended for all parties.
PG insurance: specialist policies may cover a portion of PG liability; terms, exclusions, and caps apply.

Security needs can be sector-specific. For example, contractors and trades that rely on staged payments might consider invoice finance, equipment funding, or blended facilities to limit PG exposure. If you’re in construction or M&E, explore our guidance on building services finance options here: Building Services Loans.

How to avoid, reduce, or carefully structure a personal guarantee

It’s not always possible to avoid a PG, but you can often negotiate scope and structure. The goal is to balance access to funding with sensible risk management. Here are practical routes businesses commonly use in the UK market.

Strengthen the proposal

Offer asset security: place stronger emphasis on equipment, vehicles, or receivables to reduce PG reliance.
Adjust loan variables: smaller amounts, shorter terms, or staged drawdowns can ease security demands.
Provide evidence: up-to-date management accounts, contracts, forecasts, and debtor quality reduce perceived risk.

Negotiate the guarantee

Cap liability: agree a maximum amount or percentage of exposure, with step-downs as you repay.
Split across directors: share liability proportionally to ownership or salaries to avoid overburdening one person.
Add release triggers: request PG release after specific milestones (e.g., LTV falls or profitability sustained).
Consider PG insurance: explore cover levels and costs; treat it as a risk mitigation tool, not a substitute for diligence.

Choose facilities designed to minimise PGs

Invoice finance: often lighter on PGs if your debtor book is strong and insured.
Hire purchase or leasing: primary security is the asset; some cases avoid PGs entirely.
Refinance of owned assets: reduces reliance on personal commitments by securing against existing equipment.

Situations where you may want to pause

If you cannot afford the worst-case outcome of a PG, seek independent legal and financial advice before proceeding. Be cautious about granting any charge over a principal private residence. Do not sign documents you do not fully understand, and always retain copies for your records.

Best Business Loans can introduce you to providers offering both secured and unsecured options so you can compare what’s suitable. Submit a Quick Quote to see possible routes without obligation.

FAQs, next steps, and how Best Business Loans can help

We help UK businesses explore relevant funding options via our AI matching and professional network. We do not lend or provide financial advice; we introduce you to lenders and brokers who may be able to assist. Use the FAQs below to sharpen your understanding before you apply.

Will I definitely need a personal guarantee?

Not always, but it’s common for unsecured loans and revolving facilities. Asset-backed solutions can reduce or remove the need for PGs, depending on the lender’s assessment of the asset, your financials, and the facility structure. Comparing multiple options can surface PG-light routes.

Is my home at risk with a PG?

A PG is not automatically secured on your home, but enforcement through the courts can reach personal assets if the debt remains unpaid. Some schemes and lenders restrict taking a charge over a principal private residence, but outcomes depend on the agreement and enforcement path. Take independent legal advice before signing any PG.

What size loan usually triggers a PG?

There is no universal threshold; even relatively small unsecured facilities may require a PG for limited companies. Larger facilities or higher-risk profiles increase the likelihood and strength of security. Lenders weigh trading history, credit performance, and asset coverage when setting requirements.

Can I cap or limit a PG?

Many lenders will consider caps, split guarantees among directors, or step-downs after milestones. You can also explore PG insurance from specialist insurers to cover part of your exposure. All limitations must be explicitly agreed in the final documents.

Does invoice finance need a PG?

Some providers ask for limited PGs; others rely on the debtor book and credit insurance. The quality and diversification of your receivables, along with debtor terms and concentrations, are key factors. Good ledger controls can reduce reliance on PGs.

How do I avoid a PG entirely?

Offer stronger business security, reduce the borrowing amount or term, or choose asset-backed solutions. You can also build up financial performance and credit strength before applying. In some cases, avoidance isn’t feasible if unsecured risk remains high.

What documents help reduce security demands?

Up-to-date management accounts, filed accounts, bank statements, aged debtor and creditor reports, order book, and credible forecasts. Evidence of contracts or recurring revenue can also help. Clear use-of-funds and ROI rationale strengthens your case.

What about the Growth Guarantee Scheme?

Lenders may still require PGs, but rules often restrict taking a charge over a principal private residence. Terms vary by lender and scheme iteration, and eligibility is subject to status and availability. Always review current scheme guidance and take professional advice.

Can multiple directors share a PG?

Yes — many lenders accept “joint and several” guarantees or proportional caps. Ensure the split is documented and legally clear. Each guarantor should obtain independent legal advice.

Do you work with start-ups or sole traders?

No — currently we focus on established UK limited companies and LLPs. We do not support start-ups, sole traders, franchises, property finance, or commercial mortgages. Our network is best suited to asset-rich and operational sectors.

Key takeaways

Personal guarantees are common for unsecured business loans; asset-backed options can reduce or remove them.
Security requirements depend on trading strength, assets, loan size, sector, and credit performance.
You can negotiate caps, split guarantees, add release triggers, and consider PG insurance.
Always seek independent legal advice before signing any guarantee or security document.
Use our Quick Quote to compare realistic options matched to your business profile.

Next steps: check eligibility and compare options

Best Business Loans is an independent introducer using AI matching to help established UK companies find suitable lenders and brokers. We don’t offer loans directly, and we don’t guarantee acceptance, specific rates, or outcomes. Submitting a Quick Quote is free, secure, and without obligation.

Complete your Quick Quote for an initial eligibility view.
We’ll match your profile with potential providers.
Review terms, security requirements, and costs before deciding.

Questions before you start? Email hello@bestbusinessloans.ai. If you’re ready, submit your Quick Quote now for a fast, no-obligation introduction to relevant providers.

About Best Business Loans

BestBusinessLoans.ai helps established UK businesses explore commercial finance via AI-driven matching and a network of regulated lenders and brokers. We prioritise fair, clear, and not misleading information, and we encourage independent legal and financial advice on all security and guarantee commitments. Updated October 2025.