Personal Guarantee Insurance

The amount lenders will ask for and how much you will be expected to cover will depend on how your company is structured. You may be required to guarantee all of the loan, a portion of it, or provide personal guarantees alongside other owners.  

As a result, personal guarantees sit at the intersection of your personal and professional life. You will personally be responsible for covering any nonpayment of your corporate loan, even if the finance will be exclusively used by your business. Personal guarantees are especially common in cases where you raise finance for a company with a short trading history or if your lender wants more comfort due to your company’s finances, credit or financial outlook. Lenders may also ask for personal guarantees if your business has a small number of high-value clients (rather than a large client base) or if you operate in a particularly niche or specialist area that lenders believe might see fluctuating demand.

Lenders rarely offer the total amount of your personal guarantee. They do this to ensure you remain dedicated to repaying the corporate loan to your lender at term and to mitigate their own risk. However, personal guarantees can be covered by up to 80%, although it may be less if there are circumstances which would make an insurer want to cover less of your personal guarantee. Risk, loan amount, your business’ operations and your reasons for raising finance will also influence how much an insurer will cover.

What your cover will cost will depend on how much your company is borrowing, the financial position and track record of your business, your company’s set up and the length of your loan. The more liquid your company and the better its financial outlook, the less Personal Guarantee Insurance is likely to cost. 

Significant Personal Guarantee Insurance is available for substantial corporate loans with large personal guarantees, and these will typically be more expensive than you’d pay for a smaller loan.

Yes, you can get insurance for being a guarantor. Personal guarantee insurance helps protect you from the financial risks associated with being a guarantor on a loan. If the borrower defaults, the insurance can cover the debt, safeguarding your personal assets. Contact Enness for expert advice on the best options available.

Yes, Enness arranges personal guarantee insurance for business owners who have provided a personal guarantee on a commercial loan. Personal guarantee insurance protects against the risk of the guarantee being called, covering a defined proportion of the guarantee in the event of a business default. For entrepreneurs with significant personal wealth, it is an important risk management tool that Enness recommends considering alongside any business finance arrangement. 

Personal guarantees are typically required when lenders want additional security beyond the assets or cash flow of the borrowing entity. This is common in business lending, particularly for SMEs, growth companies, or transactions where the borrower has limited trading history or where the perceived risk is higher.

A personal guarantee means an individual, usually a director, shareholder, or business owner, agrees to take personal responsibility for repaying the loan if the business is unable to meet its obligations. In some cases, guarantees may be limited to a fixed amount or linked to specific assets rather than being unlimited.

Lenders use personal guarantees to reduce risk and improve credit confidence, which can help facilitate funding that might otherwise not be available. However, because they create personal financial exposure, many borrowers choose to explore protection options such as personal guarantee insurance.

Working with a specialist broker can help negotiate more balanced guarantee terms and identify lenders that offer more flexible security structures.