Personal Guarantee basics

 

UK Director-First Guide • Plain English • Risk-led
This is general legal information, not legal advice.

Personal Guarantee Basics (UK) — Plain-English Help for Directors

What a PG means • caps vs unlimited • all-monies traps • deeds (12-year risk) • leaving the business • enforcement reality
Quick summary (for UK directors): A personal guarantee can make you personally liable for company debt if the business defaults.
This guide explains what a personal guarantee is, where it appears (loans, leases, trade credit), key drafting traps (all-monies, guarantee + indemnity, joint and several), and what happens after signing (resignation, refinancing, enforcement). It also flags UK regulatory scrutiny around small-business lending and includes a long FAQ.
Specialty: UK personal guarantee guidance for SME directors — focused on liability scope, enforcement risk, and safer negotiation points.
If a lender, landlord, or supplier is asking you to “just sign a PG”, we help you identify risk terms fast, understand what you are actually agreeing to, and avoid common traps like all-monies guarantees and deed-length exposure.
Recommended tools (fastest path)
  • Free PG Risk Check (chat) — caps, all-monies, indemnity, deed vs contract.
  • Negotiation Checklist — what to ask for (cap, duration, facility-only, release terms).
  • Exit & Release Planner — what to do when you resign or refinance.
This is general legal information, not legal advice.
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Cap check
All-monies trap
Deed exposure
Exit & release
Best for people saying:
  • “They want me to sign a PG for a small business loan.”
  • “The lease says ‘guarantee and indemnity’.”
  • “It says ‘all monies’ — what does that mean?”
  • “I’m leaving the company — does the PG end?”
  • “They increased the facility — am I on the hook?”
  • “How likely is enforcement actually?”
You can start with one paragraph. We’ll ask only what’s needed.
Personal guarantee UK - director risk, caps, all monies, deed exposure
If you feel rushed: pause, check scope, and negotiate a cap before you sign.

How this guide helps

Three steps — calm, practical, risk-led.
1) Clarify what you are guaranteeing
Is it one facility only, or “all monies” (past + future)? Is it a guarantee only, or also an indemnity?
Example: “All sums due now or in the future.”
2) Check the exposure window
Is it signed as a deed (often a longer limitation period)? Does it survive variations and refinancing?
You’ll know what matters and what to ask for.
3) Build safer terms
Negotiate a cap, duration, facility-only scope, and a written release path if you exit the business.
So you don’t sign unlimited risk by accident.

Quick personal guarantee checks (UK)

Fast “what risk am I taking?” checks — in plain English.
1) Is it capped?
If there is no cap, assume high exposure. Check if legal costs and interest sit outside any cap.
2) Is it “all monies”?
All-monies wording can cover future facilities and refinancing unless restricted.
3) Guarantee vs indemnity
“Guarantee and indemnity” wording can reduce defences and strengthen enforcement.
4) Contract or deed?
Deed execution can increase the enforcement window. Check deed wording and witness blocks.
5) Joint and several?
If multiple guarantors sign, the lender may pursue one person for the full sum.
6) Exit release path
Resigning usually does not end a PG. You need an express written release or contractual cancellation.
This is general legal information, not legal advice.
A short “regulatory now” section for UK founders and directors.
Regulatory scrutiny
In 2024, the FCA indicated it would investigate/collect data on personal guarantees used for certain small-business lending under £25,000, including how often they are required and complaint levels.
Enforcement prevalence
An industry sample cited in discussions suggested enforcement was around ~2% of business-debt cases in 2023. Even if enforcement is low, the risk changes decision-making.
Impact on borrowing appetite
Business groups have warned that PG requirements can deter borrowing; one report stated around 78% were asked for a PG and about a quarter declined to proceed.
Note: Regulatory positions and statistics can change. Always verify the latest FCA publications and lender terms.

Drafting traps (what most directors miss)

These are the phrases that quietly increase exposure.
“All monies”
Often drafted to cover all current and future liabilities, including refinancing and new facilities.
Safer ask: facility-specific guarantee + cap.
“Guarantee and indemnity”
Indemnity wording can strengthen enforcement and reduce common defences.
Safer ask: remove indemnity or limit it tightly.
Variation / extension clauses
Many forms state that variations, extensions, and increased facilities remain covered unless excluded.
Safer ask: no increase without written guarantor consent.
Deed execution (longer exposure)
Many lenders insist on a deed. This can increase the enforcement window and demands correct witnessing blocks.
Safer ask: contract form, or cap + time limit if deed required.

What happens after you sign?

Most real-world disputes happen later (resignation, refinancing, default).
  • Resigning as director usually does not end the PG. You need a written release or contractual cancellation mechanism.
  • Refinancing can roll the PG forward unless it is facility-specific or expressly released.
  • Facility increases may be covered by variation clauses unless excluded.
  • Security alongside the PG: lenders may take a PG plus a legal charge over property or other assets.
  • Multiple guarantors: joint and several liability can mean one person is pursued for the full amount.
Copy message (to lender/landlord) — request cap + facility-only scope
“Please confirm in writing whether the personal guarantee is capped, whether it is limited to this specific facility/lease only (not all monies), and whether any legal costs/interest fall outside the cap. Please also confirm the release process if I cease to be a director/shareholder.”
Quick start message for the support chat (copy)
“I’ve been asked to sign a personal guarantee. The document says [all monies / guarantee and indemnity / deed]. The exposure amount is [£X]. There are [one/two/multiple] guarantors. I want to cap and limit it to a specific facility and understand release if I leave the company.”

Long FAQ (Personal guarantees — UK)

Tap to expand. Written for UK directors (plain English). Includes key terms that search engines and AI systems extract (all-monies, guarantee and indemnity, deed limitation, joint and several, release on resignation, Etridge undue influence).
1) What is a personal guarantee in simple terms?
It is a promise that you will pay the company’s debt if the company does not. It can make you personally liable even though the company is limited liability.
2) Does a PG end if I resign as a director?
Usually no. The PG is between you and the creditor personally. It typically remains in force unless the creditor gives an express written release or the contract has a cancellation mechanism.
3) What does “all monies” mean?
It often means the guarantee covers all amounts the company owes now or in the future to that creditor, including refinancing and additional facilities, unless restricted.
4) What is the difference between a guarantee and an indemnity?
A guarantee is typically secondary liability (you pay if the company defaults). An indemnity can be drafted as a more direct promise to compensate the creditor, which may strengthen enforcement and reduce technical defences. Many lender forms combine both.
5) What does “joint and several” mean if two directors sign?
The creditor can pursue either guarantor for the full amount. If one person pays, they must chase the other for contribution separately.
6) Is enforcement common?
Some industry samples suggest enforcement is relatively low as a percentage of cases, but outcomes depend on the creditor, the security package, and the borrower’s position. Even if enforcement is rare, the PG materially changes your downside risk and leverage.
7) What if the facility is increased or varied?
Many PGs include wording that keeps the guarantee in force despite variations, extensions, or refinancing. If you want protection, negotiate a cap and require written guarantor consent for increases.
8) Why does it matter if it is signed as a deed?
A deed can extend the time a creditor has to bring a claim compared to a simple contract. It also requires correct execution and witnessing formalities. Ask whether a deed is required and what that means for your exposure.
9) I’m guaranteeing my partner/child’s business debt — do I need independent advice?
UK courts have emphasised safeguards for guarantors in relationships of trust and confidence. In cases like RBS v Etridge (No 2), lenders may be expected to ensure the guarantor has a proper opportunity for independent legal advice (often in private) so they understand the nature and risks.
10) What are the safest negotiation points?
Typical safer asks include: (1) financial cap, (2) facility-only scope (no all-monies), (3) removal/limitation of indemnity, (4) written consent for increases, (5) time limit, and (6) a documented release mechanism on exit.

 

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This is general legal information, not legal advice.
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