Getting a Business Loan Without Personal Guarantees in the UK

When looking for finance to help your business acquire key assets, boost working capital or fuel growth, many lenders request a personal guarantee. While this might help your loan approval chances, it leaves you liable for debts if your business encounters future repayment issues.

We explore the pros and cons of getting a business loan without personal guarantees, how to get one, who qualifies and the alternatives to consider. 

What is a business loan without a personal guarantee?

A personal guarantee is a promise to cover the amount borrowed if the business can’t repay the debt. This legally binding agreement between a lender and a business owner (or director) makes the owner/director personally liable for repaying the loan if the business defaults on repayments or goes bankrupt. So, getting a business loan without personal guarantees means you don’t need to provide these assurances to the lender to secure the loan. 

Financial lenders often request personal guarantees to ensure they won't be out of pocket if companies run into financial difficulties. However, you will find business loans for limited companies with no personal guarantee required. As a business owner, consider your capacity or appetite to take on the risks to personal assets, or if you’re more comfortable seeking a loan without this stipulation.

Here are some common scenarios where loans may be issued without a personal guarantee:

• Highly profitable companies with a strong financial track record 
• Asset-rich businesses that can use these assets to secure a large loan amount
• Low borrowing amounts for small businesses with minimal lender risk
• Unsecured business loans, with approvals based on other factors, such as strong credit ratings, high-revenue potential and assets securing the loan

How to get a business loan without a personal guarantee

Business loans with no personal guarantees aren’t necessarily advertised as such. You often have to look at banks or business finance lenders’ product pages and drill down into the features and eligibility criteria to see which require a personal guarantee. In fact, some loan products will simply state that “a personal guarantee may be required.” 

In many cases, the requirement for a personal guarantee depends on various factors, such as how much you want to borrow (and for how long), what assets you have to use as security and your creditworthiness. Therefore, you’ll need to do a fair amount of research and planning.

Can I get a business loan without a personal guarantee in the UK?

Yes. Numerous lenders in the UK provide business loans without a personal guarantee, but they’re usually offered to established and profitable businesses with good credit ratings. You’ll most likely get these loans through alternative finance lenders offering asset-backed lending. However, some banks offer loans without requiring a guarantee, depending on the borrowing amount and track record. 

Many digital lenders, including iwoca usually, require a personal guarantee for small business loans, but offer greater flexibility and cost control benefits. Also, there are UK government-backed loan schemes where the government provides a full or partial guarantee to help new and small businesses access the capital they need to grow. 

If you meet the following criteria, you should be able to get a business loan without personal guarantees in the UK:

• You have an established trading record (typically over two years)
• You have solid profits and consistent cash flow
• You possess a strong business credit rating and history
• Your business has multiple directors and strong corporate governance
• There are various business assets you can use as collateral to secure the loan

Some lenders waive guarantees if loans are secured by assets or based on certain thresholds. So, if you’re choosing a secured business loan backed by assets like machinery, vehicles or property, you may not need to provide a guarantee. The same goes for unsecured loans, where lenders outline turnover limits for borrowing different amounts. If you tick the necessary boxes, it will reassure these lenders about your risk level, allowing them to approve a loan without a guarantee being required.

How to improve your chances of securing a business loan without a guarantee

Here are a few ways to boost your chances of getting approved for business loans without personal guarantees:

• Build a strong credit profile with responsible debt management, making prompt repayments and paying your suppliers promptly.
• Broaden your credit profile, leveraging different forms of credit to prove your ability to handle commercial borrowing.
• Strengthen your company's balance sheet by increasing operational efficiency, using smart cash flow management, leveraging tax relief opportunities and improving profitability.
• Keep detailed, up-to-date financial records and file returns on time.
• Use digital tools and integrations for open banking, connected accounting and real-time financial data to evidence good cash flow and affordability.

All these factors help strengthen finance applications and give you a better chance of getting this type of business loan. 

Pros and cons of business loans without personal guarantees

While not requiring a personal guarantee may seem like an obvious advantage, there are some downsides to consider. We’ve outlined the main pros and cons for business owners below:

Pros

• Your personal assets and finances are protected in the event of your business failing to make loan repayments
• Business and personal finances are kept fully separate

Cons

• It may reduce the amount you can borrow (particularly for small businesses)
• You’re likely to be subject to stricter credit checks and other eligibility criteria 
• Loans without personal guarantees typically come with less flexibility
• Loan providers often set higher interest rates to offset increased lender risk

Which lenders offer business loans without personal guarantees?

As mentioned, you can get a UK business loan without director guarantees from various sources, but whether lenders request a guarantee depends on numerous loan factors and business circumstances. 

Some specialist lenders waive personal guarantees for certain business types and needs. At the same time, other forms of commercial finance, like asset and equipment finance, may not require a personal guarantee (with the assets themselves providing suitable security for lenders). 

Many high street banks require personal guarantees unless substantial collateral is provided. Business assets act as the security, therefore, a personal guarantee may not be needed. Regardless, it can still depend on your financial history and profitability. 

Can start-ups qualify for a business loan without a personal guarantee? (FAQ)

Early-stage businesses are less likely to qualify for a loan without a personal guarantee. Start-ups, by their nature, lack trading history and proof of healthy cash flow and debt management. However, you can explore government schemes where eligible new businesses may get loans without needing to provide a personal guarantee. In some cases, the UK government guarantees a percentage of the loan amount to broaden access to finance and spark business growth. 

The most common scenario for getting a start-up loan without a personal guarantee is if the business has various assets to use as security or when applying for an unsecured loan with a low borrowing amount.

What alternatives are available if you can’t get a no-guarantee business loan?

You should consider other financing options if you can’t get a small business loan with no personal guarantee included. Here are some good business finance alternatives for SMEs:

• Invoice finance: While some providers may request a personal guarantee, your pending client invoices usually act as the security. This form of borrowing offers fast access to capital when funds are tied up in these invoices, and approvals are largely down to client creditworthiness (limiting risk for you and the lender). 
• Revenue-based finance: Finance products like merchant cash advances provide credit based on a percentage of future card sales.
• Secured business loans: You can use business assets like vehicles, machinery or property as collateral to secure loan amounts.
• Government-backed loans: The UK government provides loans through the British Business Bank and via partnerships with various banks and lenders, often covering a proportion of any required guarantee.
• Combining finance options: By sourcing multiple sources and forms of funding, from traditional or alternative lenders, you can get the cumulative capital you need, without personal guarantees on the full amount.

Should your business choose a loan without a personal guarantee?

Having seen the pros and cons of business loans with no personal guarantee and ways to get them, you need to decide if it’s the right option for your business needs

Here are some questions to consider when judging the suitability of a business loan without personal guarantees:

• How strong is your independent financial health?
• Is protecting your personal assets and finances a priority?
• How much do you need to borrow and for how long?
• How well placed is your business to make repayments (with interest) over that period, based on your cash flow, revenue potential and forecasts?
• What assets does your business have to put up as collateral?
• Does a potentially smaller loan amount with less flexibility align with your business growth, or might it hinder your growth ambitions?

What are the risks of taking out a business loan without a personal guarantee?

While your personal finances may be protected, there are several risks involved for limited companies seeking business loans without a personal guarantee. These include key company assets being required as security, getting tied into stricter loan terms and the potential negative impact on business credit profile if you fail to make repayments promptly – late payments or defaults limit future borrowing opportunities.

With iwoca’s flexible business loans, although we require a personal guarantee, you typically get more control than loans without guarantees. Our small business loans are designed specifically for SME needs. You can apply entirely online, in minutes (with minimal documentation) and get a fast decision, with successful applicants receiving funds on the same day, often within hours of approval.

Borrow between £1,000 and £1 million for a few days up to 60 months. We provide flexible conditions and manageable monthly repayments, aligned to your cash flow, with the ability to use funds for any business purpose. Plus, you only pay interest on what you draw down, and there are no fees for early repayment.

Find out how to get a business loan with iwoca and use our business loan calculator to see your likely repayment costs.

Sources:

• Guide to Personal Guarantees for Business Borrowing [British Business Bank]
• Business Loans You Can Get Without a Personal Guarantee [Nerd Wallet]
• What Do Personal Guarantees Mean for Business Borrowing? [iwoca]
• Business Loan Options and Types Available in the UK [iwoca]
• Unsecured Business Loans [iwoca]

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