Borrow through a limited company and, somewhere in the offer, there will usually be a line about personal guarantees. It is the point at which a piece of company borrowing reaches past the company, and it is worth reading closely rather than at the end of a long afternoon. This article sets out what the document does and the questions worth asking about yours. Whether to sign one is a decision for you, taken with a solicitor who has read your paperwork.
What is a personal guarantee?
A personal guarantee is your promise to meet the company's debt if the company cannot. It is a separate contract between you and the lender, sitting alongside the mortgage itself.
In England and Wales, a guarantee has to be in writing and signed by you, or someone you've authorised, to be enforceable (Statute of Frauds 1677, section 4 — checked October 2026).
If the company stops paying and the lender's recovery from the property falls short, the guarantee is what lets the lender look to you for the difference. That is the whole of the mechanism, and the detail — how much, for how long, and in what circumstances — lives in the wording of the particular document in front of you.
Why does a lender ask a company director for one?
Because a limited company is a separate legal person, and its liability stops at its own assets. A lender looking at a company with the building as its main asset is being asked to rely on something that can be wound up.
A guarantee is a common part of lending to a limited company, and it is the reason the lending decision is not purely about the company's balance sheet. It also tells the lender something it cannot read in the accounts: that the people running the business are prepared to stand behind it. Plenty of commercial lending to companies is written this way.
What is the difference between a personal guarantee and a debenture?
A debenture is security over the company's wider assets, often including the property; a personal guarantee reaches you personally instead. A lender may take one, the other, or both.
The practical difference is who is exposed. A debenture widens the lender's claim within the company — stock, book debts, equipment. A guarantee steps outside the company altogether. Reading an offer, it is worth being clear which of the two you are being asked for, because the documents can arrive together and look similar on a summary page.
Can the scope of a guarantee be negotiated?
Sometimes. Its scope may be negotiable — capped, time-limited, shared between directors — and what is available depends on the lender, the case and how the rest of the security is arranged.
A capped guarantee limits the amount you can be pursued for. A time limit ends the exposure at a defined point or on a defined event. Where there is more than one director, the question of how liability is split between you is a separate one again, and the answer is in the wording rather than in the conversation. Ask early: scope is easier to discuss while terms are being agreed than after an offer has been issued.
What should I ask before I sign one?
Ask what the cap is, if there is one, and what it applies to — the loan alone, or interest and costs as well.
Then work through the rest with your solicitor:
How long does the guarantee last, and what ends it? Does repaying the loan release it automatically, or does something have to be done?
If there is more than one director, is each of you liable for the whole amount or for a share of it, and what happens if one of you leaves the business?
What has to happen before the lender can call on it — does it have to pursue the company and the property first?
Does it cover this loan only, or is it drafted to cover other borrowing with the same lender, present or future?
Is any other security being taken at the same time, and in what order would the lender use it?
What would be required of you if it were called on, and over what timescale?
Those are questions about a document, and the answers are in your document rather than in a general article. Take it to a solicitor before you sign.
Who should I take advice from?
A solicitor, on the guarantee. They are the people who can read the wording you have been given and tell you what it commits you to, and a guarantee is a legal document before it is a lending one.
Your accountant is the right person for how the borrowing and the ownership structure sit together for tax. Our part is the lending: which lenders fit the case, what each of them typically asks for by way of guarantees and other security, and how that shapes the options worth putting in front of you. We will tell you what a lender is asking for and why. Whether you sign it is yours to decide.
Are commercial mortgages regulated by the FCA?
Commercial mortgages for business or investment purposes are not regulated by the Financial Conduct Authority.
What does your advice cost?
Our standard fee is £495, payable when your application is submitted. In some more complex cases, an additional broker fee of up to 1% of the loan may apply. The first conversation is always free, and we always confirm your total fee in writing before any work starts.
We are also paid a procuration fee by the lender if your case completes, and we will tell you what it is before you proceed.
The short version
A personal guarantee is your promise to meet the company's debt if the company cannot, and it is a separate contract from the mortgage.
It is a common part of lending to a limited company, and it is why the decision is not purely about the company's balance sheet.
Scope is sometimes negotiable — capped, time-limited, split between directors — and is easier to raise while terms are being agreed.
The questions that matter are about your wording, so take the document to a solicitor.
Read next: buying your business premises with a commercial mortgage, or the jargon section of our commercial mortgages page.
Lawes Financial Limited (FRN 1046161) is an appointed representative of Andrew Charles Consulting Ltd, which is authorised and regulated by the Financial Conduct Authority (FRN 304904).