Taking out an unsecured business loan can unlock growth quickly – but it often comes with a significant personal commitment. In most cases, directors or shareholders are required to sign a personal guarantee, meaning your personal finances could be at risk if the business cannot repay.
What is a personal guarantee?
Because unsecured loans are not backed by assets such as property or equipment, lenders use personal guarantees to reduce risk.
A personal guarantee is a legally binding agreement that makes you personally responsible for repaying a business loan if the company defaults.
How it works in practice
By signing a personal guarantee, you agree that your personal assets – including savings, investments or property – may be used to repay the debt if the business cannot. Your liability may include:
- The outstanding loan balance
- Interest and fees
- Legal and recovery costs
In many cases, this obligation remains in place even if you leave the business, unless you are formally released from the guarantee.
What are the risks?
If the loan defaults, lenders may take legal action to recover what is owed. This can include court judgments, enforcement against personal assets or, in extreme cases, bankruptcy proceedings.
Before agreeing to a personal guarantee, LendingCrowd strongly recommends seeking independent legal advice to ensure you fully understand the implications.
LendingCrowd business loans
LendingCrowd offers unsecured business loans from £75,000 to £350,000 (including fees), supported by personal guarantees. For larger loans, additional asset security will be required.
It takes just minutes to apply for a LendingCrowd business loan – start your journey today.
