Why Credicorp does not take a personal guarantee
A personal guarantee is a separate contract that turns a company debt into a personal debt. Most UK short-term business lenders require one. Credicorp does not. This is the longer-form version of why — what a personal guarantee is, what it does, why most lenders want one, and the reasoning behind the operating policy.
What a personal guarantee is
A personal guarantee (often called a "PG") is a contract between a lender and a director (or shareholder, or any individual) under which that individual promises to repay the company's debt if the company itself does not. It is a parallel contract to the loan: the company remains the borrower on the loan agreement, but the individual signs a separate deed of guarantee that the lender can call on if the company defaults.
Mechanically, it means the lender has two routes to recover money — from the company's assets, and from the guarantor's personal assets (savings, salary, eventually their home if the guarantee is unlimited and they cannot pay).
Why most short-term lenders want one
Three reasons, in order of how often they are admitted publicly:
- Risk-reduction. A guarantor gives the lender a second pocket to dip into. That lowers the expected loss on default, which in principle should lower the price of credit.
- Skin in the game. A director who has personally guaranteed the loan thinks differently about default. The argument is that this is good for the lender (less default risk) and for the borrower (more disciplined use of the credit).
- Veil-piercing without litigation. The director-shareholder of a small UK company is, in practical reality, the same person as the company. Insisting on a PG short-circuits the corporate veil so the lender doesn't have to argue about it later.
All three are real reasons. None of them is in itself wrong. They just have a price.
What a PG costs the director, beyond money
The price is asymmetric. A PG is cheap to give when the business is healthy and expensive at exactly the moment when the business is in trouble — which is precisely when the lender will want to enforce it.
- It turns a company difficulty into a personal one. Your bank account, savings, and (if the PG is unlimited) home equity become recovery options for a creditor of the company.
- It bypasses the protection of limited liability. The reason directors operate through a limited company is the limited-liability shield. A PG voluntarily switches it off for one specific creditor.
- It complicates insolvency. Even if the company goes into administration or liquidation in an orderly way, the PG-creditor can still come after the director afterwards.
- It can change behaviour in unhelpful ways. A director facing a PG call may keep funding a failing business with their own money to avoid the call — sometimes for longer than they should.
Why Credicorp doesn't take one
Three reasons:
- The product is small and short. Loans of £50–£500 over 14–84 days, capped at 100% of principal in total cost. The lender does not need a second pocket to cover the maximum exposure on a single loan.
- Body-corporate borrowing is the entire product thesis. Credicorp lends to UK limited companies, LLPs and PLCs as a deliberate perimeter choice. Taking a PG would undo the body-corporate framing — the lender would effectively be lending to the director, just through a corporate front. That is not the product.
- Underwriting carries the risk. The operator's underwriting is on the company — Companies House verification, business credit check, affordability check on the bank statements. The lender takes the company-level credit decision on its own book; it does not need a director to backstop it.
What that means in practice for a director
When you sign a Credicorp business-loan agreement, the signature is on the company's behalf. There is no parallel deed of guarantee. The company's bank account is the repayment route. If the company defaults, the operator's recovery is at the company level — against company assets, through company processes, ultimately via the courts against the company.
You as director are not personally liable for the loan. This is also true under section 16 of the Companies Act 2006 — the company is a separate legal person with its own balance sheet — but the absence of a PG is what makes that "true in practice", not only "true in theory".
How this fits with the regulatory position
Credicorp's lending sits outside the FCA's consumer-credit regime because the borrower is a body corporate, not an individual — see our lending-and-regulation page and the longer-form explainer. A personal guarantee would arguably make the relationship look like consumer credit through the back door: the company is the nominal borrower, but the individual is the real one. Not taking a PG keeps the borrower-status honest.
What about Credicorp Flex?
Same answer. The revolving facility has the same product pricing, the same eligibility, and the same no-PG position. The borrower is the company; the director is not personally liable on any drawing.
The trade-off, said out loud
There is one. Body-corporate-only lending without a personal guarantee is a tighter product than a director-guaranteed unsecured loan would be. Limits are small. Terms are short. The price reflects the risk that the company takes the loan, the company falters, and the lender's recovery options are company-level only.
If you need more credit than a Credicorp loan offers, or cheaper credit, the operator is on the record recommending several alternatives — business overdraft, business credit card, invoice finance, asset finance, a longer-term SME loan from a mainstream lender like iwoca or Funding Circle. Those alternatives often require a PG. That is the trade-off.