Personal Guarantees - Company Debt Advice

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Personal Guarantees

When a business wants to raise money, take out a credit card, seek an overdraft the lender may seek security in the forms of a personal guarantee. The personal guarantor undertakes to repay the debt owed.

The guarantor will not have to provide the funds in a bank account but will be called upon to make good the guarantee in the event of failure. There is no limited liability here and so the bank can seek funds from al the individual's assets - their house, their investments.

There are cases-less common now- where banks fail to take up the guarantees in the event of a default. So why give a guarantee - often this is the only way to get the funds you require. It may be given to a supplier when starting out in business in order to get them to give credit; it may be given to a credit card company in order to give a credit card limit; it may be given to a leasing company or hire purchase company in order to enable them to agree to lend on fixed assets.

At the time this is taken out there is no pain only a signature and a future possible but unlikely event. However, there are many circumstances where this can be turned into a reality - it could be the loss of a major customer; fraud within the company or default on a debt by a customer.

It is possible to withdraw a guarantee - only with the agreement of the lender - and in most cases there is no reason for them to agree and so it is extremely difficult to get the guarantee withdrawn. A stronger alternative form of security would enable the release to be made but in the case of companies with a problem this is unlikely.

When the lender calls on a guarantee this will come as a shock and will inevitably cause the individual financial problems as most people do not hold large amounts of cash for this eventuality. Lenders may be open to negotiation - and this is an option to consider. Again talk to an adviser about any individual liabilities as the solution to be adopted may be influenced by all circumstances.

This is a very stressful time and professional advice should be considered. A quick call and a few minutes later and options will surface to make the outcome better.


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This website has been written and intended for registered limited companies in the UK only. The site contains general information and resources for limited companies only in financial trouble. Insolvency Helpline only work with limited companies to offer solutions for their business debt problems. Insolvency Helpline cannot offer help or advice any other entity except limited companies. Insolvency Helpline does not advise individuals, sole traders or partnerships seeking debt advice. If you are an individual, sole trader or partnership seeking advice, we recommend using an alternative service.

© 2013 Insolvency Helpline
Tel: 0800 668 1391 | Email: info@insolvencyhelpline.co.uk | Web: www.insolvencyhelpline.co.uk