Personal Guarantee (PG)

A personal guarantee (PG) is a legally binding commitment by one or more company directors (or shareholders) to personally repay the company's debt if the company fails to do so. By signing a personal guarantee, a director's personal assets - including savings, property, and other personal wealth - can be pursued by the lender if the business defaults.

Personal guarantees are standard practice for most unsecured business loans in the UK. They are less common for secured business loans (where the property itself provides sufficient security) and typically not required for asset finance (where the asset is the security). When a PG is required, it is important to understand the exact scope: is it limited to a specific amount, or unlimited? Is it several (your share only) or joint and several (you are fully liable even if other guarantors cannot pay)?

Always take independent legal advice before signing a personal guarantee. Understand what you are committing to, under what circumstances it can be called, and what assets you are putting at risk. Some directors obtain PG insurance, which pays out if the guarantee is called.

Related terms