What should I consider before giving a personal guarantee?

A limited company normally has its own debts, but a personal guarantee creates a separate personal commitment. Read the guarantee alongside the borrowing agreement and any security documents. Check whether it covers one facility or wider present and future debts, and whether the amount is capped. Interest, fees and enforcement costs may also be covered. Where several people sign, do not assume each person is responsible only for an equal share: the lender’s rights depend on the wording. Ask what happens if the facility is increased, the business is sold or you stop being a director. Leaving the company does not necessarily release an existing guarantee.

Use the business cash forecast to test how repayments would be met if sales fall or a major customer pays late. Then consider what a demand under the guarantee would mean for your own finances. Ask whether the lender will accept a lower cap, alternative security or a clear release mechanism, but do not treat those options as guaranteed. Keep a record of guarantees already given so several facilities do not create an unseen combined exposure. CASS can help quantify the business funding need and likely repayment pressure. An independent solicitor should explain the legal wording and enforcement risk before you sign, particularly where personal assets or a family home could be affected.