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Personal guarantees, explained.
A personal guarantee is the most consequential thing a director can sign when a company borrows. It quietly undoes the separation between the company and the person — turning a company debt into a personal one. This guide explains what a guarantee is, how it works, what it puts at risk, and why Credicorp deliberately does not take one.
What a personal guarantee is
A promise by a person to pay a company's debt if the company cannot.
When a company borrows, the company is the borrower. It is a separate legal person, and its debts are its own. That separation is the whole point of incorporating: a director is not personally liable for the company's borrowing simply because they run it.
A personal guarantee is a separate promise, given by an individual — usually a director — that if the company does not repay, they will. It is a contract between the lender and the person, sitting alongside the loan agreement between the lender and the company. The director does not receive the money. They take on the obligation to pay it back if the company defaults.
Lenders ask for guarantees to reduce their own risk. Where a company is small, young, or has few assets, a director's signature gives the lender a second pocket to reach into. That is rational from the lender's side. The cost falls on the director, who has pierced the protection that incorporation was meant to give them.
How it turns company debt into personal debt
The mechanism is simple, and that is exactly why it is easy to underrate.
Without a guarantee, if a company cannot pay its debts, the lender's claim is against the company. The director's own house, savings and income are not in play. The most the director can lose is what they put into the company. That is limited liability working as intended.
With a guarantee, the position changes the moment the company defaults. The lender can demand payment from the director personally, under the guarantee, for the company's debt. If the director cannot pay, the lender can pursue them as it would any personal debtor — through a county court judgment, a charge over their property, or in the worst case bankruptcy. The guarantee can outlive the company itself: even if the company is dissolved, the personal promise stands.
Some guarantees are unlimited — covering whatever the company owes, however large. Some are capped at a figure. Some are supported by a charge over the director's home, which makes the home directly at risk. A director signing one should know exactly which kind it is, what it is capped at, and what assets stand behind it. These are the terms that decide how much of a person's life is tied to the company's borrowing.
With and without a guarantee
The same default, two very different outcomes for the director.
| No personal guarantee | With a personal guarantee | |
|---|---|---|
| Who owes the debt | The company only | The company, and the director if it defaults |
| If the company cannot pay | Lender's claim is against the company | Lender can pursue the director personally |
| Director's personal assets | Not exposed by the borrowing | Savings, income and possibly the home at risk |
| If the company is dissolved | The debt ends with the company | The personal promise can survive |
| Limited liability | Intact | Pierced for this debt |
A guarantee is not inherently wrong — it is a normal feature of much business lending, and sometimes the only way to access a larger or cheaper facility. But it is a decision to expose personal assets, and it should be made with that fully in view, not buried in a signature page.
Why Credicorp does not take one
Credicorp lends to UK limited companies, LLPs and PLCs, and the borrower is always the body corporate. None of its three products — the Business Bridging Loan, Credicorp Flex or Credicorp Slice — takes a personal guarantee. The agreement is between Credicorp Limited and the company, and it stays there. If the company cannot pay, the director's own money and home are not on the line.
This follows from how the products are built. The sums are small and short-term, and every product is bounded by a 100% cost cap, so the company's exposure is fixed and knowable from the outset — see cost caps explained. Decisions rest on the company's affordability, evidenced by its business bank statements, rather than on a director's personal credit file or a personal promise to fall back on. The lending is to the company because the company is what is assessed.
It also reflects a deliberate position rather than an oversight. The operator's own note, why we don't take personal guarantees, sets out the reasoning in full, and the operator restates it on its customer site at credicorp.co.uk. The related guide on secured versus unsecured business borrowing explains how a guarantee differs from security over company assets — Credicorp's products take neither.
What to check before signing any guarantee
If another lender asks for one, these are the questions that matter.
- Is it limited or unlimited? An unlimited guarantee covers whatever the company comes to owe, not just today's balance.
- What is the cap, if any? Know the maximum figure you are personally promising.
- Is your home pledged? A guarantee supported by a charge over your property puts the home directly at risk.
- How and when does it end? Some guarantees roll on to cover future borrowing and survive the company's dissolution.
- Have you taken independent advice? A guarantee is a personal legal commitment; it is worth a solicitor's eye before you sign.
A short due-diligence routine for any UK business-credit offer, including the guarantee question, is set out in a borrower's due-diligence checklist before taking finance.
Where to go next
- Why we don't take personal guarantees — the operator's reasoning in full
- Secured versus unsecured business borrowing — how a guarantee differs from security
- Cost caps explained — how the 100% cap bounds the company's exposure
- The three Credicorp products — unsecured, no personal guarantee
- Lending and regulation — why the company is the borrower under Article 60B