Personal guarantee
Most UK SME finance products to limited companies require at least one personal guarantee, particularly where there is no tangible asset security. A PG is a separate legal contract from the loan itself: it binds the named guarantor to step in and meet the company's obligations if the company defaults. Lenders see it as a critical alignment-of-interest tool, especially for newer or thinly capitalised businesses.
A PG can be limited or unlimited. A limited PG caps the guarantor's personal exposure at a stated amount — often the loan principal, sometimes a percentage of it. An unlimited PG exposes the guarantor to the full outstanding balance plus interest, fees and recovery costs. UK directors should always check the cap, the joint-and-several wording (where multiple directors guarantee, each can typically be pursued for the whole amount), and any independent-legal-advice requirement.
PG-backed lending is not the same as secured lending. The guarantor is unsecured against their own assets unless the lender separately registers a charge against, for example, their home. In practice, however, an enforced PG often results in bankruptcy proceedings against the director, with knock-on effects for personal credit, future directorships and house equity.
Worked example
How the numbers play out
A two-director limited company borrows £75,000 unsecured. Both directors sign a joint-and-several limited PG capped at £75,000 each. If the company defaults with £60,000 outstanding, the lender can pursue either director (or both) for the full £60,000 plus costs — up to but not beyond the £75,000 cap per guarantor.
Keep exploring
Related finance types
See if this concept fits your funding need
Two-minute eligibility checker maps your profile against UK SME lender criteria. Educational guidance only — not a loan offer.
Important — educational guidance only
- Not regulated by the FCA and not a credit broker.
- Not financial, legal or tax advice.
- Not a loan offer and not a guarantee of approval.
- Subject to lender underwriting — criteria can change.
Lendrly provides general eligibility guidance only. It is not financial advice, a loan offer, or a guarantee of approval. Provider criteria can change and final approval is subject to lender underwriting, affordability checks, credit assessment, and documentation. Lendrly is not a regulated credit broker; we do not submit applications on your behalf.