Reviewed 30 September 2026. General information, not advice.
What is a personal guarantee?
A personal guarantee is a commitment by an individual to meet specified business obligations if the business does not. A director can become personally responsible even when the borrowing is in a limited company’s name. The exact liability depends on the wording.
Unsecured does not mean no personal risk
An unsecured business loan may still require a personal guarantee. The absence of a specific asset charge on the business does not remove the potential effect on your own finances.
Ask what the guarantee covers
Is liability capped or unlimited? Does it cover only this loan or future borrowing too? Does it include interest and enforcement costs? If several people sign, could the lender pursue one person for the whole amount? Have the wording explained before committing.
Understand when it ends
Selling shares, leaving the business or refinancing may not automatically release you. Check how a release is obtained and get written confirmation from the lender. Do not rely on an informal understanding with another director.
Get advice on the actual document
This guide is general information, not legal advice. Consider independent legal advice on the specific guarantee and your circumstances. Take time to understand the downside as well as the business opportunity.