The Business Bulletin
FINANCE
Personal guarantees – be wary! One of the recent hot topics relating to the CBILS and Business Bounce Back Loan Schemes (BBL) was the absence of a personal guarantee for a majority of these loans for limited company borrowing.
It has been a standard requirement
The absence of guarantees from
without telling their partners with
for a majority of limited company
the whole of the BBL (loans up to
whom they are likely to hold a
lending that a personal guarantee
£50,000) and for all CBILS facilities up
significant amount of their assets
from at least one director is in place
to £250,000 (and for many over this
jointly. This can include property,
to support the debt, regardless of the
as well) significantly increases the
vehicles or any other assets of value.
quality of the business and the size of
risk to the lender and in this case, the
the lending facility.
Treasury, who have guaranteed BBL’s
This ensures that the director(s) of the business cannot walk away
in full and CBILS up to 80%. There are several reasons why this
from liabilities in the company name
step was taken when the scheme was
without having to find the ability to
rolled out (time, ease, underwriting,
repay from personal resources.
etc) but, instead of rehashing old
While there are ways to mitigate this risk, a majority of this debt will remain exposed and, in all likelihood, with the partner remaining in the dark.
content, I would prefer to focus on a survey of over 1000 small business owners by Purbeck Personal Guarantee Insurance which has found that more than 1 in 5 (22%) has not told their life partner that they have signed a personal guarantee.
JB Commercial Finance
Personal guarantees in business lending
James, an ex-banker, is a highly
“We have estimated that over
James Blacklaws
experienced and fully Independent Commercial Finance broker, authorised and regulated by the FCA. With whole-ofmarket access. He specialises in helping businesses declined by their banks; businesses looking to grow, survive and purchase commercial property. 07722 432128 james@jbcommercialfinance.co.uk jbcommercialfinance.co.uk
420,000 small business owners in the UK were acting as personal guarantors for business loans prior to the pandemic. Furthermore, around £2.1bn in CBIL loans were taken by business owners and directors which had personal guarantees attached.” In a nutshell, this means that these individuals have agreed to personally secure business debts
Issue 19 | 9
