Do you know the risks of offering a personal guarantee on a business loan? We’ve outlined all the key risks to think about when entering into a loan agreement.
To fund the growth of your business, you’ll almost certainly need to take out a business loan at some point. But many lenders will ask you to provide a personal guarantee against this business loan – and there’s a risk element to consider when taking out finance.
So, what does offering a personal guarantee on a secured loan actually entail? And what are the principal risks of becoming a guarantor?
Understanding the key risks of a personal guarantee
When you agree to offer a personal guarantee, you’re essentially promising to repay the loan if the business can't make the payments – and to do this out of your own money or assets. This might seem like a small step to take, but giving a personal guarantee can have serious consequences if your business is unable to repay the loan.
Here are some of the risks of giving a personal guarantee:
Talk to us about your business finance plans
If you’re planning on taking out a business loan, it’s important to consider the possible risks. Make sure you understand the risks involved and have a plan in place for repaying the loan if the worst happens and the business can’t meet the repayments.
We can help you work out a strategy for your business finance plans. We can also connect you with a suitable independent financial adviser or legal expert to explore the risk threats