Directors personal guarantee
We have found that many of our clients are signing personal guarantees to establish an account with a supplier without any real understanding of what it actually means. Just recently I had a conversation with a business owner who is a director of his company, the trading entity, who had no idea he had put is personal assets on the line when making the guarantee. I have asked a local legal firm Insight Law to explain.
What is a “personal guarantee”?
A guarantor steps into the shoes of the borrower and personally guarantees that the borrower will make payments on time. If the borrower defaults, the guarantor is personally responsible for all of the borrower’s debt, including interest, late fees and penalty charges.
In other words, if you have signed a personal, or director’s, guarantee and your company runs into financial difficulties, you are personally responsible and your personal assets, including the family home, may be at risk.
Talk to your accountant and solicitor before signing any guarantee documents to find out what the fine print really means!