PERSONAL GUARANTEES

A personal guarantee is a pledge, by someone, that he or she promises to pay any deficiencies on a specific loan or commercial commitment. It should be noted that most bank guarantees are also indemnities which make the guarantors principally liable with the borrower.

Did you know?

Personal Guarantees do not cease when you die and repayments can be taken from your estate. A Guarantee is still in force even after a debt is repaid, and could be used for other debts (whether past, present or future), unless you have limited your obligations in the loan documents.

When the customer is a trust, and the supplier has named the trustees personally, then the trustees are personally liable to the supplier and the supplier does not need to get guarantees from them.

Each individual who signs a guarantee, even if they are only a 10% owner in a business, is 100% responsible for the amount being guaranteed.

If you bank with the same bank you have a personal guarantee with, they can simply take money from any of your accounts without permission.

The terms of agreement on Personal Guarantees can often be negotiated with lenders.

Personal Guarantees can be cancelled, and you will only be liable for the debt to that point, though it should be noted that the bank can retain this for two years in case of any claw backs against the loan.

Think very carefully before offering up a personal guarantee. Always seek the advice of an independent advisor before doing so. We unfortunately have seen some sad cases where the guarantor ends up with all of the debts! So it is wise to consider these VERY carefully.