Did you know that you can insure that doesn’t have to happen?
Most company directors believe that they know what a Personal Guarantee means…
In fact in a recent survey almost 50% of Directors asked have a PG in place— the personal guarantee is often a requirement in a wide range of business funding situations —- many of these Directors did not appreciate the potential consequences —- that means potentially there are thousands of UK Directors who do not realise that should their business fail to meet its obligations under a finance agreement the funder will come to the Director for the outstanding debt due .
The situation is often worse than initially envisaged when the company fails. In the situation where there are a number of Directors supporting a finance facility and the guarantee is ‘joint and several’ should a fellow director be unable to pay his share of the liability then the whole amount can fall to the Director who has the assets to settle the debt !
Be quite clear — a bank or other finance provider will come to you to honour a Personal Guarantee and that may mean your home could be at risk .
When a PG is requested there are choices a) say ‘no ‘— and then the vital funds are not available or b) say ‘yes’ but take insurance out to cover the risk of your business failing to cover the liability.
Personal Guarantee Insurance is a little known solution to mitigating your personal risk in running your business.
For further advice on Personal Guarantee contact Peter French at Merlin Corporate Finance to discuss.