# What is a personal guarantee — and why we don’t take one *Source: https://credicorp.co.uk/support/what-is-a-personal-guarantee/* A personal guarantee is one of the most important things to check before your company borrows — and one of the easiest to overlook. It can turn a company debt into a personal one. This article explains what a personal guarantee is, how lenders use it, and why we do not take one. ## What a personal guarantee is A personal guarantee is a separate, legally binding promise by an individual — usually a company director — to repay the company’s debt if the company cannot. The borrower on the loan is still the company, but the guarantee sits alongside it. If the company defaults, the lender can pursue the guarantor personally. That is a significant shift in risk. Normally, the whole point of a limited company is that it is a separate legal person — a [body corporate](/support/what-is-a-body-corporate/) — and its debts are its own. A personal guarantee deliberately pierces that protection for one specific debt, exposing the director’s personal assets, which can include personal savings and, in some cases, their home. ## How other lenders use it Personal guarantees are common in business lending, especially for “unsecured” loans. Because an unsecured loan has no asset behind it, lenders often manage their risk by asking a director to guarantee it personally. That is why a loan can be advertised as “unsecured” yet still put your personal finances on the line — the security is you. We explain that distinction in [secured vs unsecured business loans](/support/secured-vs-unsecured-business-loans/). When a personal guarantee is in place and the company fails to pay, the lender can demand the money from the guarantor, take court action against them as an individual, and enforce against their personal assets. Directors sometimes take out separate personal-guarantee insurance precisely because the exposure is real. ## Why we do not take one We do **not** take a personal guarantee. We lend to your company, the company is the borrower, and the company is liable for the debt. If the company cannot repay, we pursue the company — not you personally. We made that choice deliberately. Our product is a short-term facility for the business, and we keep the risk where the borrowing is: with the business. It keeps the line between company and director clean, and it means a director is not putting their family’s finances behind a short-term business loan. We assess affordability on the company itself — its turnover, bank-account history and business credit file — not on your personal income, which is consistent with not relying on you as a backstop. ## What this means for directors Because there is no personal guarantee, a director’s personal assets are not on the line for this loan. We also do not record the loan on your **personal** consumer credit file — we run a business credit check on the company and an identity check on you, but the borrowing itself is the company’s. You can read more in [will applying for a Credicorp loan affect my credit file](/support/will-applying-for-a-credicorp-loan-affect-my-credit-file/). That said, “no personal guarantee” is not the same as “no consequences”. The company is still fully responsible for repaying, and a default can affect the company’s own credit standing and its ability to borrow in future. Directors also have separate legal duties to their company, and there are situations — quite apart from any guarantee — where a director can face personal liability, for example through wrongful trading. Those are general company-law matters, not part of our loan; if you want the wider picture, see [can a director be personally liable](/support/can-a-director-be-personally-liable/). ## The takeaway A personal guarantee makes a director personally responsible for a company’s debt. Many lenders require one even on unsecured loans. We do not. The borrowing is the company’s, the liability is the company’s, and the figures you will repay are set out in full on your Key Information Sheet (KIS) and in the Business Loan Agreement before you sign. When comparing offers, always ask whether a personal guarantee is required — it is one of the most consequential terms in any business loan. See what we currently offer on [our business loans page](/business-loans/). --- Credicorp Limited — UK lender to limited companies (Company No. 16093826). credicorp.co.uk