Funding information: Aarubi Finance Ltd is not authorised or regulated by the Financial Conduct Authority. We provide Merchant Cash Advance services with YouLend and 365 Finance and may introduce eligible businesses to selected unregulated commercial finance providers. We do not provide consumer credit, regulated mortgages or personal financial advice. Eligibility and terms apply. This article is general information, not individual financial, legal or tax advice.
A personal guarantee can make a business funding decision a personal financial risk. Before signing, understand the actual obligation, not simply whether the loan is advertised as “unsecured”.
For a shorter explanation, see our finance FAQs on guarantees and security.
What are you promising?
A guarantee can require you to meet specified business obligations when the agreement's trigger conditions are met. Limited-company status does not cancel a commitment signed personally. The British Business Bank explains the basic purpose and risks of guarantees.
Do not assume the provider must exhaust every company asset before making a demand. The documents and applicable law matter. Obtain independent legal advice on the guarantee, any indemnity and the finance agreement together.
Limited, unlimited and joint-and-several wording
| Wording | What to ask your solicitor |
|---|---|
| Limited guarantee | What is the cap, and are interest or enforcement costs outside it? |
| Unlimited guarantee | Which debts, costs and future facilities can be covered? |
| Joint and several | Could one guarantor face the full covered claim? |
| Continuing guarantee | When does it end, and what written release is required? |
These descriptions can overlap; they are not simple low-, medium- and high-risk product categories.
If several directors sign, liability is not automatically divided by shareholding. Funding Circle explains joint-and-several guarantees and why one guarantor can face the total covered debt. Your own document may contain limits or different wording.
A company debenture is not a charge on your home
A company debenture commonly creates security over company assets. It is distinct from a personal guarantee or a separately granted charge over personal property. Funding Circle's debenture explanation describes business-asset security.
Personal assets may nevertheless be exposed under a guarantee and the relevant enforcement process. Do not assume your home is safe because no mortgage was taken at the start, or automatically charged because the company signed a debenture. Ask for an explanation of each document and any scheme-specific protections.
A practical review before signing
Bring the complete documents and proposed funding figures to an independent solicitor. Ask:
- Which events allow a demand, including defaults other than missed payments?
- What is the maximum potential exposure, including costs?
- Does it cover only this facility or later borrowing too?
- What happens if a co-guarantor cannot pay?
- Can the lender change the facility without fresh consent?
- What happens when you sell shares or leave the business?
- What evidence confirms discharge when obligations are settled?
Separately, test whether the business can meet payments in a quiet period. Approval is not a personal-risk assessment for you or your family.
Can you negotiate or insure the risk?
You can ask for narrower obligations, a cap or defined release conditions; the provider does not have to agree. Do not rely on an oral assurance that contradicts the signed terms.
Personal-guarantee insurance, where available, has limits, exclusions and claim conditions. It does not amend the guarantee or automatically stop a lender's claim. Ask an appropriately authorised insurance adviser about cover and independent legal counsel about the obligation.
Does another product remove personal risk?
Not necessarily. Asset finance, invoice facilities and cash advances each have their own documents and protections. Sales-linked payments do not, by themselves, answer whether a personal obligation exists. Compare business funding structures without assuming an alternative is guarantee-free.
Does selling the business release me?
Not automatically. Obtain the provider's written release or confirmation required by the documents, checked by your adviser.
What if the provider has already made a demand?
Seek independent legal advice promptly and do not ignore deadlines. Contact the provider about the position and obtain appropriate debt support. Our finance support FAQs explain where to start.
AARUBI does not provide legal advice or decide whether you should sign a guarantee. Our funding enquiry page explains the limited scope of our service.
