If you’ve signed a personal guarantee on a business loan, it can feel like the pressure is suddenly all on you. And when the business is struggling, that weight can be heavy, especially if you’re worried it could impact your home, your savings or your family.
But here’s the truth: you’re not alone, and there are ways forward. We help directors in this exact situation every day. People who’ve done their best for the business and now need to take back control. With the right advice from a licensed insolvency practitioner, it’s often possible to limit the damage and find a solution that protects your personal future.
What is a personal guarantee?
A personal guarantee is a legal commitment to repay a loan if your company can’t. It’s often required when the lender sees the business as higher risk, like if it’s new, doesn’t have many assets, or has had cash flow problems.
By signing, you’re agreeing that if the company can’t pay the debt, you’ll cover it personally. That could mean repaying from your own funds or being pursued legally for what’s owed.
How does a personal guarantee work?
The company is the borrower. But you, as director, act as a fallback for the lender. If the business keeps up with repayments, the guarantee sits in the background. But if things go wrong, for example the company defaults or goes into liquidation, the lender can enforce the guarantee and come after you directly.
It doesn’t always happen straight away. But once the lender loses confidence they’ll recover the money from the business, they may shift their focus to you.
Are personal guarantees enforceable?
Yes, but not always without question. Courts generally uphold personal guarantees, but there are grounds for challenge. A guarantee might not hold up if:
- It wasn’t properly witnessed or executed
- You didn’t understand what you were signing
- The terms were unclear or misleading
- You signed under pressure or without legal advice
If you’re unsure whether a guarantee you’ve signed is enforceable, we can review it for you and explain where you stand.
What happens if the guarantee is enforced?
If a company falls behind on payments and doesn’t engage with creditors, the situation can escalate fast. Creditors may:
- Issue a statutory demand
- Apply for a County Court Judgment (CCJ)
- Petition the court to wind up the company
HMRC, in particular, has wide enforcement powers. If they believe you’re avoiding payment or acting dishonestly, they can freeze company bank accounts, demand personal deposits, or apply for your personal bankruptcy.
Once formal insolvency proceedings begin, the appointed insolvency practitioner will also investigate director conduct. If there are signs of mismanagement or breach of duty, you may be reported to the Insolvency Service—which can lead to disqualification or personal claims.
What’s the personal risk?
The main risk is being held personally responsible for a debt that was meant to be the company’s. That could mean:
- Legal claims against you personally
- Damage to your credit record
- Court judgments
- A charging order over your home
- In extreme cases, bankruptcy
Having a personal guarantee doesn’t mean you’re doomed to face all of this. Many directors find that, with the right support, they can agree a settlement, enter into a formal solution like an IVA, or challenge the guarantee’s validity altogether.
Can a personal guarantee affect my home?
Potentially, but it’s not automatic. If a lender gets a judgment against you and you don’t pay, they may apply for a charging order to secure the debt against your home. If there’s enough equity, they could apply for a sale order. This is typically a last resort.
If your house is jointly owned or mortgaged, the lender would need to go through extra legal steps, and many don’t pursue this route if they believe you’re willing to cooperate and find a solution.
What makes a personal guarantee invalid?
Not every personal guarantee holds up to scrutiny. Some common reasons they may be void or unenforceable include:
- It wasn’t signed under the correct circumstances
- You were misled about what it was
- You signed under duress or lacked capacity
- The terms weren’t clear or were unfair
- The guarantee wasn’t tied to the correct lending agreement
If there’s any doubt at all, speak to a professional. We regularly review personal guarantees and can flag if something doesn’t look right, before it becomes a bigger problem.
Are personal guarantees ever worth it?
They can be. Many lenders simply won’t offer business finance without one. And for directors who are confident in their company’s future, a personal guarantee might feel like a reasonable risk.
But it’s always worth thinking through:
- Could you afford to repay this personally?
- Would you want to?
- Have you got legal advice on what you’re signing?
If you already feel uneasy, or the business is in trouble, get advice before things go any further.
What can you do if you’ve already signed one?
Even if the company is struggling, a licensed insolvency practitioner can help you explore:
- Whether the guarantee is enforceable
- How to minimise personal exposure
- Options for settling or restructuring the debt
- Whether formal insolvency (for the business or personally) could bring relief
And crucially, we’ll guide you in a way that protects your position. Not just now, but for the long term.
Does liquidation affect personal guarantees?
Company liquidation wipes out business debts, but personal guarantees sit outside of that.
If the company goes into a Creditors’ Voluntary Liquidation (CVL), and the debt can’t be repaid from company assets, the lender may still come after you.
But here’s the good news: insolvency practitioners deal with this all the time. We can walk you through what liquidation means, whether it’s the right step, and how to handle personal guarantees alongside it, without letting the stress take over.
You’re not on your own
Signing a personal guarantee doesn’t mean your life is over. And financial pressure, however bad it feels right now, doesn’t have to dictate your future.
We’ve helped hundreds of directors navigate this exact challenge. If you’re worried about a business loan with a personal guarantee, talk to us. We’ll help you:
- Understand exactly where you stand
- Explore every option available to you
- Make a clear, confident plan
No scare tactics. No judgment. Just practical, personal support to help you move forward with clarity
