Personal Guarantee

Glossary

Banking

Personal Guarantee

A personal guarantee is a formal commitment by an individual, typically a company director, to guarantee debt payments on behalf of a business. In the event a business can’t pay its debt on time or within a cure period or is declared insolvent, lenders will trigger the guarantee and the guarantor will be held personally liable for all of the company\'s debt repayments, or to the level of a guarantee cap as agreed with lenders. The existence of directors’ guarantees – often involving the posting of security such as the director’s home – offers an additional layer of security for lenders, which may result in better finance terms, or it may be the factor that enables a business to obtain finance at all.

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