Personal guarantees are common on invoice finance, overdrafts, property leases, plant finance and sometimes trade accounts. They are easy to sign when the facility is needed and easy to forget until the company is under pressure.
A company process does not automatically release the guarantee
Liquidation, administration or a CVA deals with the company's affairs. The guarantee is a separate contract with the director or shareholder. Whether it can be limited, negotiated or left in place depends on the wording and the creditor.
That is why guarantees should be listed before a process is chosen, not discovered afterwards. Director support is the place to start that mapping.
What to gather
- Copies of the guarantee and the underlying facility or lease.
- The current outstanding balance and any security already held.
- Whether more than one director signed, jointly or separately.
- Any personal assets already charged, including a home.
Construction and asset finance
Contracting businesses often have guarantees attached to plant, vehicles, invoice finance and yards. If the company cannot keep up HP payments, the funder may recover the asset and still look for a shortfall.
Those issues are covered in more detail on director support for construction businesses. They sit alongside, rather than replace, the general director-duties analysis in this guide.
The aim of an early review is not to create alarm. It is to separate company risk from personal risk while there is still room to plan.
