Will I need to provide security or a personal guarantee?

Short answer — what most UK businesses should expect

In many cases, lenders will ask for some form of security or a personal guarantee, especially for larger or longer-term finance. The exact requirement depends on the type of finance, your business structure, credit profile, and the assets available as collateral. Best Business Loans does not provide finance directly but can help you identify lenders and brokers who match your security and guarantee preferences.

What is “security” and what is a “personal guarantee”?

Security is an asset or right offered to a lender that they can enforce if your business defaults. Typical security includes charges over property, business assets, stock, plant and machinery, or book debts. Security gives the lender a legal route to recover funds by selling or taking control of the secured asset.

A personal guarantee (PG) is a director’s or owner’s promise to be personally liable if the company cannot repay the loan. A PG turns business debt into a potential personal liability for the guarantor. Lenders commonly request PGs for limited companies, particularly where business assets don’t fully cover the loan value.

Security and PGs are separate but often used together: security protects the lender’s claim on business assets, while a PG increases the lender’s recovery options by targeting personal assets. Knowing the difference helps you negotiate better terms and assess personal risk.

When lenders usually ask for security or a PG

High-value loans, long-term finance and property-backed lending almost always require security of some sort. For example, commercial mortgages require first-charge security over the property, while asset finance usually takes the equipment itself as security. Invoice finance and asset-based lending commonly use a fixed or floating charge over receivables and stock.

Personal guarantees are frequent where the business credit history is limited, the borrower is a small/owner-managed business, or the lender judges the risk to be higher than normal. Banks and some specialist lenders often expect director PGs for unsecured or partially secured lending. Start-ups and newer companies are more likely to face PG requests, even for modest debts.

Unsecured facilities do exist, but they usually carry higher rates, stricter covenants, or lower limits. Some alternative lenders and peer-to-peer platforms can offer unsecured options for strong personal or business credit profiles, but acceptance is not guaranteed.

Types of security and how they affect your business

Fixed charges attach to specific assets such as a named property or individual items of plant and machinery. A fixed charge gives the lender strong control over that asset and priority in enforcement. Floating charges cover shifting pools of assets like stock and receivables and only crystallise into a fixed charge on certain events, giving lenders broader but lower-priority protection.

Debentures combine fixed and floating charges and are commonly used for larger corporate facilities. Hire purchase and conditional sale finance effectively use the financed asset as security until outstanding amounts are repaid. Second-charge and negative pledge arrangements are also used, and each has different legal and practical consequences for enforcement and ranking against other creditors.

Security can restrict what you can do with assets (for example, selling or re-mortgaging) and may trigger covenants requiring regular reporting. Understanding each charge type and its operational impact is essential before agreeing to terms.

Personal guarantees: scope, limits and practical precautions

PGs vary in scope: some are unlimited, some capped to a specific amount, and others are joint-and-several where each guarantor may be pursued for the full debt. Unlimited PGs expose personal assets, while capped PGs limit liability to a defined sum. You should seek to negotiate caps, sunset clauses and exclusions (for example, excluding future claims or limiting enforcement for small defaults).

Legal advice is essential before signing a PG because it creates direct personal exposure. You may also ask for personal asset exclusions such as primary residence carve-outs where commercially feasible. Directors can sometimes negotiate indemnities, time-limited guarantees or guarantees that convert to limited forms after specified milestones are met.

Always request a copy of the proposed security and guarantee documents early, check for cross-default clauses, and ensure you understand what events trigger enforcement. A specialist broker or solicitor can help you reduce personal exposure and explain realistic negotiation points.

Practical steps to reduce risk and next actions

First, gather clear financials: management accounts, cashflow forecasts, asset registers and ownership documents. Lenders and brokers will use these to assess whether security or PGs are necessary and to value potential collateral. A transparent information pack speeds the process and often improves negotiating leverage.

Second, discuss options with a broker or lender early. Some lenders offer “non-personal guarantee” products for asset-backed loans or larger corporates. Specialist lenders might accept lower-value security in place of a PG, while mainstream banks often prefer a mix of security and PGs for smaller businesses.

Third, ask targeted questions before applying: will the lender require a PG, is it unlimited or capped, what assets will be secured, are there fees for valuations or legal searches, and can terms be negotiated? Best Business Loans can match your business to lenders who typically require less personal exposure or who allow negotiable PG terms. For more on the types of business finance we match to, see our business finance overview here: https://bestbusinessloans.ai/loan/business-finance/.

Frequently asked compliance and negotiation points

How does this relate to FCA and advertising rules?

Best Business Loans is an introducer and does not provide regulated lending itself, but we aim to follow FCA principles for clarity and fairness in communications. We will clearly state that we introduce lenders or brokers and that final terms and regulatory obligations rest with those providers. We recommend you check whether any lender is FCA-authorised before proceeding.

When negotiating, keep records of conversations and obtain any promised concessions in writing. Always consider independent legal advice for security and PG documents, and ask lenders for plain-English explanations of triggers and enforcement steps.

Key takeaways

– Many lenders will require security or a personal guarantee for higher-value or riskier lending. Countersigned measures vary by lender type and loan purpose.

– Security can be fixed, floating, a debenture or simply the asset financed; each has different consequences for control and enforcement. Personal guarantees convert business debt into personal liability and should be negotiated and limited where possible.

– Prepare solid financial information, ask precise questions about caps and carve-outs, and seek legal and broker advice before signing. Best Business Loans can help you match with lenders and brokers who suit your risk appetite and can assist with an eligibility check or Decision in Principle.

Ready to check your options? Complete a Quick Quote to see which lenders or brokers may offer finance without excessive personal exposure. Submitting a Quick Quote is free and non-binding — start your eligibility check today and let our AI match you to relevant funding partners.

Updated: 29 October 2025. For personalised guidance contact hello@bestbusinessloans.ai.