It is increasingly common to find that commercial lenders will request a personal guarantee from the directors/owners when a company borrows money – either to purchase a property or to purchase equipment or other capital items.
This is particularly prevalent in the residential buy-to-let market where a lender requires the directors/owners of the limited company to provide a guarantee for the company’s liabilities under the mortgage.
It will often also be a lender requirement, when requesting a personal guarantee from you, that you obtain independent legal advice from a solicitor. This is often to protect the lender so that it can say that you knew the risks that you were entering into but it is also important for you, so that you do fully know and understand those risks.
For example, it is important to understand that a personal guarantee can put your home at risk of being repossessed in the event that your business suffers financial problems and defaults on the repayments.
Given the current economic climate and the rise in inflation which could make mortgage and loan repayments harder to meet, it is therefore important to seek specialist legal advice before signing a personal guarantee agreement, and often a requirement of your lender to do so.
Separately to the above, if you have already entered into an arrangement with a lender and your business is experiencing difficulties in meeting the repayment terms, prompt independent legal advice could be critical to avoid your home being repossessed. We can in those circumstances check whether the guarantee has been correctly set up or whether there are grounds to dispute its validity.
We can also liaise with your lender to arrange a mutually acceptable repayment schedule which will allow your business to remain viable and also protect your residential property.
Our fixed-fee arrangements will also give you peace of mind that you won’t receive any unexpected additional costs to add to your financial worries.
Get in touch with our company commercial team to find out how we can help you with directors’ personal guarantees.