Britain, we’re told, is a nation of shopkeepers – plucky, self-determined individuals who want to go at it alone and to really create something for themselves and their families. Here at BestUnsecuredLoans, we think that’s true and that’s not because of the big banks and financial institutions, it’s despite them. We want to change things so we’ve got a range of unsecured Business loans and short-term business loans that are a lot friendlier to the personal and financial circumstances of entrepreneurs than the big boys offer.

 Every year, thousands of British business owners are caught out by personal/director’s guarantees they offer on loans and other types of business agreements they enter into. We’re determined to change all of that and, in this article, the BestUnsecuredLoans team look at:

• What personal/director’s guarantees are
• The circumstances in which you need to offer a personal/director’s guarantee
• The risks involved in giving a personal/director’s guarantee
• If you have to give a personal/director’s guarantee, how you can protect yourself
• Short-term business loans for limited company directors without personal/director’s guarantees
• Short-term business loans for sole traders and partners
• How BestUnsecuredLoans can find lenders who don’t require a personal/director’s guarantee

 Short-term business loans with personal/director’s guarantees

 Business loans are extremely valuable for many small businesses; whether they’re just starting up or expanding, this form of financing helps make it possible. And with lots of business loans now, your home is no longer used as collateral – or so it appears.

 These unsecured loans can be a cheap and easy way to get the money you need for your business, without using your own property to back it up. However, the need for a personal guarantee renders these perks somewhat obsolete (source: Real Business Rescue).

 You, as the business owner, must promise to repay the loan from your personal funds if the company defaults. Potentially, you could face losing your savings, house or other personal assets if the loan isn’t repaid (source: Cashsolv).

 Why would I need a personal guarantee?

 If a bank or financial institution doubts your business’s ability to repay the loan, they may ask for you to give a personal guarantee. This is essentially giving permission for the lender to pursue you personally if you can’t repay the business loan.

 Typically, the bank will ask for those with 20% or more of the company’s shares to provide personal guarantees. This spreads the risk over several people. In some cases, the lender may need your spouse to sign the guarantee so you can’t just transfer assets into their name.

 What are the risks of a personal guarantee?

 As well as any assets and money that can be taken, it’s like that your lender could take legal action against you too. This could damage your credit, make it extremely difficult to borrow in the future, and impact many other aspects of your life (source: The Balance).

 A personal guarantee on your business loan could greatly affect your family. Not only could you lose your home, but as many lenders require your spouse’s guarantee, their assets could also be seized.

 If you are a shareholder, and the other partners are unable to pay, it could fall on you to pay the whole thing. The bank is allowed to try to collect the “entire balance from any and/or all partners who personally guarantee business loans”, according to Justin Pritchard of The Balance. Meaning you may pay far more than your fair share.

 How can I protect myself against a personal guarantee?

 Get insurance

 Personal Guarantee Insurance should be considered before you sign. It’s a new type of insurance product created to help small-medium business owners protect their personal assets when they sign a personal guarantee.

 Should you be called upon the repay the loan, your insurance will cover 70% or your net liability. This is so the insurance works as a ‘safety net’ for you, “without eliminating the motivation to overcome difficulties” according to Asterisk Financial co-founder Mark L. Ricciardelli in an interview with The Balance.

 Get advice

 Be sure to take legal and personal financial advice before you provide personal guarantees for your company. Make sure you know exactly where you stand in regards to liability before you make your decision.

 Once you have built credit for your business, and have gathered assets for collateral, you won’t have to guarantee your loans. In the meantime, make sure you understand how a personal guarantee could affect you, and be sure to take financial advice.

 Speak to BestUnsecuredLoans

 You may also consider whether or not there are other options available. If you can raise the funds for your company yourself or find a different business loan which does not require a personal guarantee, do so. And that’s where BestUnsecuredLoans can help.

 Short-term business loans for limited company directors

 If you run a limited company, apply through BestUnsecuredLoans for the short-term, unsecured business loan you need. The loan is made to you personally and then it’s your responsibility to transfer the money we lend you to your company. If you choose not to, that’s fine but, either way, this unsecured business loan is your personal responsibility to pay back. That said, there are no director’s or personal guarantees on the loan meaning that your home is not at risk.

 Short-term business loans for sole traders and partners

 Sole traders and partners in an unincorporated partnership are never asked to personally guarantee loans in the way that limited company directors are because the loan will be made to you personally – as with a standard personal loan.

 However, our unsecured business loans to sole traders and partners do not give us or our lenders the powers that a personal/director’s guarantee gives to lenders when working with a limited company director.

 An unsecured business loan is a safe decision-making without a personal or director’s guarantee

 As you can see, even with expensive insurance in place that requires a number of conditions (made clear in advance) before you’re paid out, signing a business agreement, whether a loan or a commercial lease, which requires you to take out a personal or director’s guarantee puts everything at risk, even your home.

 For many decades now, the problem that entrepreneurs in the UK have faced is that, if they make a bad business decision, they’re not allowed to move on from it. Instead, they and their families will be punished heavily and for years to come. If you need money to build your business, the last thing you want to do is to put your family home at risk, particularly if you have worked hard for years to buy one and to keep up the mortgage repayments.

 BestUnsecuredLoans is different. Even if you have a poor credit rating and your business is young or old, we understand the challenges you face. Wherever possible, we want to help you establish, consolidate, and grow your business. And that’s exactly why we don’t ask you to put everything on the line if you want to borrow money from us.

 If you run a limited company and you’d like a personal loan which you can invest in your limited company, please click here. If you’re a sole trader or one of the partners in an unincorporated business, please apply to us for the funding you need by clicking here.