Funding Release — Commercial Finance Guides · August 2026
There is no question in commercial finance that causes more anxiety than this one. And understandably so.
You formed a limited company specifically to create a legal separation between your personal finances and your business. The whole point of "limited liability" is that if the business fails, your personal assets — including your home — are protected. A Personal Guarantee asks you to voluntarily give that protection up.
Here's what you actually need to know.
A Personal Guarantee (PG) is a legal commitment from a company director to personally repay a business debt if the company cannot. When you sign a PG, you are agreeing that if the company defaults, the lender can pursue you as an individual — not just the company — to recover what's owed. In practice, this means your personal assets become security for the loan. That includes, in serious cases, your home.
Lenders ask for Personal Guarantees because limited liability is exactly what it sounds like — a limit on what they can recover from the business. If a company has few hard assets and goes into administration, an unsecured lender may recover very little. A PG gives them a route to recovery that bypasses the corporate veil. For newer businesses, businesses with limited assets, or businesses where the director's personal creditworthiness is strong, lenders often see the PG as essential.
No — and this is one of the most important things to understand about the modern commercial finance market.
Many alternative and challenger lenders offer genuinely unsecured facilities — particularly for working capital loans up to certain amounts — where no Personal Guarantee is required. These lenders assess the business on its trading data, revenue, and cash flow rather than requiring the director to put their personal wealth on the line.
The likelihood of needing a PG depends on several factors:
Loan size — Smaller facilities (typically under £100,000–£150,000) are more commonly available without a PG than larger ones.
Trading history — An established business with 2+ years of consistent revenue is a stronger candidate for unsecured lending than a newer one.
The lender — Some lenders have built their entire model around unsecured lending; others require a PG as standard.
The product type — Asset finance often doesn't require a PG because the asset itself is the security; invoice finance similarly uses the invoices as collateral.
First, understand exactly what you're being asked to sign. There is a significant difference between a limited PG (capped at a specific amount) and an unlimited PG (no cap, meaning you're personally liable for the full outstanding balance plus any costs). Always ask for the PG terms in writing before signing anything. Ask specifically whether the guarantee is limited or unlimited. Ask what triggers enforcement. Ask whether you can negotiate the cap. A legitimate lender will always provide clear written terms.
Second, consider whether the product is right for your situation. If a PG on a specific facility feels too exposed, explore whether a different product type — asset finance, invoice finance — could meet the same need without the same personal risk.
Some facilities will require a PG. Some won't. The only way to know which category you fall into is to check your options — and checking costs you nothing. When your finance partner presents terms to you, any PG requirement will be clearly explained before you commit to anything. You are under no obligation to proceed if the terms don't work for you.
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