A personal guarantee is your legal commitment to repay your company's business loan yourself if the company can't. For UK limited company directors, that can put personal savings and assets on the line. Here's how guarantees work, what happens if one is called in and exactly how iwoca's personal guarantee works.

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What is a personal guarantee?

A personal guarantee is a legal commitment that states you'll be personally responsible to repay your company's debt if the company can't. Because a limited company is a separate legal entity, the personal guarantee is what makes you liable for that debt yourself.

Normally, a limited company's debts belong to the company, not to you – that's the point of limited liability. A personal guarantee sets that protection aside for a specific debt. If the company doesn't pay, the lender can turn to you for repayment.

A personal guarantee:

• Is a separate agreement you sign alongside the company's loan.
• Only comes into play if the company doesn't repay.
• Isn't the same as being a guarantor on someone else's personal loan.
• Doesn't put a charge on your home unless the guarantee is secured – the wording will say.

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How iwoca's personal guarantee works

Every new Flexi-Loan comes with a personal guarantee from the company's director or directors. We don't secure our loans against property, so there's no charge over your home when you borrow.

We'd rather you knew exactly what you're signing before you apply. Here's how it works with an iwoca Flexi-Loan:

• Who signs: at least one company director must sign. We don't need every director to sign.
• Your home: we don't take a charge over your home or any other property.
• How much you can borrow: from £1,000 to £1m, over up to five years.
• Repaying early: there are no early repayment fees, so you can clear the loan whenever you're ready.

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What happens if you can't repay an iwoca loan?

Talk to us early. If you miss a payment, we'll get in touch. Together we can agree a repayment arrangement based on what the business can afford, or put a temporary hold on the account.

Here's what to expect:

1. We'll contact you by email, text or letter, and someone from our Collections team will call you.
2. We'll look at the business's income and outgoings with you and agree a plan it can manage, or pause repayments for a while.
3. If you're dealing with something difficult, like illness or bereavement, tell us. We can give extra support, including pausing contact.
4. Only if we can't reach an arrangement might we bring a County Court claim. That claim can name the company and anyone who signed a personal guarantee.

If your business is facing serious debt problems, you can get free, confidential advice from Business Debtline.

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Types of personal guarantee

Guarantees differ in two ways: how much they cover (limited or unlimited) and whether they're backed by a charge over property (secured or unsecured).

A secured guarantee is a much bigger commitment, because your home is directly on the line from the day you sign. It works in a similar way to a loan secured against property. The gov.uk guide to personal guarantees sets out both types.

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How much could you be liable for?

A limited guarantee caps what you owe, while an 'all monies' guarantee can cover everything the company owes the lender, including interest and costs.

When you read a guarantee, look for:

• A cap – a maximum amount, or a share of the loan.
• Whether interest, fees and legal costs come on top.
• Whether it covers only this loan or any future borrowing from the same lender.
• Whether you're signing alone or with other people.

UK Finance, the banking trade body, explains these terms in its 2025 guide, Understanding personal guarantees.

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Joint and several guarantees

If more than one person signs, the guarantee is usually joint and several. That means the lender can ask any one of you for the full amount, not only your share.

It's then up to the guarantors to settle between themselves who pays what. So if you're signing alongside other directors, think about what happens if one of them can't pay.

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Why do lenders ask for a personal guarantee?

A guarantee gives the lender an extra layer of protection and a second route to repayment if the company can't pay. It matters most when a loan isn't secured against business assets, like an unsecured business loan.

For you, offering a guarantee can help the company get finance it might not otherwise get, or on better terms. It doesn't guarantee a lower rate, though.

Not every business loan needs one. If avoiding a guarantee matters more to you than the terms on offer, compare business loans without a personal guarantee.

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Which products usually need a personal guarantee?

Lenders can ask for a guarantee on most kinds of unsecured finance for limited companies. The most common are:

• Business loans, especially unsecured ones.
• Asset finance and leasing, depending on the lender.
• Business credit cards – see business credit card personal guarantees.

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Who can give a personal guarantee?

For a limited company loan, it's usually the directors and sometimes major shareholders. That's different from being a guarantor on a personal loan, where you promise to cover someone else's personal borrowing.

Lenders often ask every director to sign. Each person who signs takes on their own legal responsibility, so each should read the terms and get their own advice.

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What happens if a personal guarantee is called in?

A lender can call in a guarantee once the company defaults and doesn't put things right. It'll demand payment from you. If you can't pay or agree a plan, it can go to court.

UK Finance says lenders treat calling in a guarantee as a last resort, and that repossessing a home to repay one is rare. When it does happen, the usual steps are:

1. The company defaults. For example, it misses repayments or goes into liquidation. The loan agreement sets out what counts as a default.
2. The lender demands payment from you. It doesn't have to chase the company first – a guarantee lets it come straight to you.
3. A statutory demand (sometimes). This gives you 21 days to pay or reach an agreement before the lender can apply to make you bankrupt. See statutory demands on gov.uk.
4. A court claim and judgment. If you don't pay, the lender can take you to court. A county court judgment (CCJ) stays on the public register for six years, unless you pay in full within one month.
5. Enforcement. Only after a court judgment can the lender enforce it: through bailiffs, deductions from your wages, freezing money in your bank account or a charging order on property. See enforcing a judgment on gov.uk.

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Can you get out of a personal guarantee?

Repaying the debt will usually end the guarantee. Resigning as a director or closing the company doesn't necessarily. The practical routes are repaying, asking the lender to release you or getting advice if you think the guarantee is unfair.

What usually ends your guarantee:

• The debt it covers is repaid in full.
• The lender agrees in writing to release you.
• Someone else replaces you as guarantor, with the lender's agreement.

What doesn't end it on its own:

• Resigning as a director or selling your shares.
• The company closing or going into liquidation – that can be when a guarantee is called in.
• Time passing, unless the guarantee has an end date or the time limit for a claim runs out.

A guarantee can sometimes be challenged – for example, if you were pressured into signing or given misleading information. That's one for an independent solicitor.

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How long does a personal guarantee last?

A guarantee lasts until the debt it covers is repaid or you're released. After a demand, a lender in England and Wales usually has six years to bring a claim, or 12 years if the guarantee was signed as a deed.

These limits come from the Limitation Act 1980 on legislation.gov.uk for England and Wales, and UK Finance's guide for Scotland. The clock usually starts when the lender demands payment, not when you sign.

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What to check before you sign a personal guarantee

Read exactly what you're guaranteeing: how much, for how long, whether it's secured and whether other guarantors share it. Then get independent legal advice.

Before you sign, check:

• How much you're guaranteeing – a cap, the whole loan or 'all monies'.
• Whether it's secured on your home or other property.
• Whether it ends when this loan is repaid or also covers future borrowing.
• Whether other directors are signing too, on a joint and several basis.
• What counts as a default, and what the lender must do before calling it in.
• Whether you could repay it from your own savings if you had to.

The best time to protect your personal assets is before you sign. Ask for a cap, avoid a secured guarantee if you can and think about insurance. Check whether your guarantee needs a witness – one signed as a deed does.

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Personal guarantee insurance

Personal guarantee insurance pays some of what you owe if a guarantee is called in. Cover and cost vary, so compare what's excluded and how much is covered against the price.

Policies usually cover a share of the guarantee rather than all of it, and you'll need one in place before any problems start. Whether it's worth it depends on the size of the guarantee and how much of it you could pay yourself.

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Can you negotiate a personal guarantee?

The terms of a personal guarantee aren't always fixed. You can ask for a cap, a time limit or a release once the loan is repaid, but lenders don't have to agree.

It helps to ask before you sign, and to have your adviser explain which terms matter most. A strong credit history and a record of repaying on time can put you in a better position, especially for future borrowing.

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Does a personal guarantee affect your credit score?

Signing a personal guarantee doesn't affect your credit score. It can if the guarantee is called in and you don't pay, or a court judgment is made against you.

If you miss payments you owe under the guarantee, that debt is recorded against you and can lower your personal credit score. A CCJ in your name stays on the register for six years unless you pay it in full within one month.

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Personal guarantee FAQs

Does the lender have to chase my company before me?

No. A guarantee usually lets the lender ask you for payment once the company defaults, without going after the company first.

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If I resign as a director, does my guarantee end?

No. Your guarantee stays in place after you resign, unless the lender agrees in writing to release you.

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Does a personal guarantee need to be witnessed?

It depends how it's signed. A guarantee signed as a deed needs a witness. Check the document or ask the lender if you're not sure.

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How do I complain about how a guarantee was set up or enforced?

Complain to the lender first. If you're not happy with its answer, you may be able to take it to the Financial Ombudsman Service. To raise one with us, see how to make a complaint.