If you’ve ever looked at small-business borrowing — overdrafts, credit cards, asset finance, working-capital loans — you’ve probably been asked, somewhere in the paperwork, to sign a personal guarantee. It’s a routine part of small-business lending in the UK. Credicorp does not use them. This piece explains what a personal guarantee actually is, why most lenders require one, and the choice we made — deliberately and publicly — not to.
What a personal guarantee is
A personal guarantee is a contract in which the director (a real person) promises to pay back the company’s debt out of their own pocket if the company can’t. It sits alongside the main loan agreement. If the company is unable to repay — say it goes into liquidation, or its bank account is empty — the lender can pursue the named guarantor for the outstanding balance, exactly as if the loan had been a personal loan to them all along.
In practice, this means the director’s house, savings, and other personal assets are at risk. The risk is real, not theoretical: when small companies fail, lenders enforce personal guarantees, and directors end up paying balances that the company itself never could.
Why most lenders use them
The honest answer is: it’s the easier business model. Asking for a personal guarantee transfers the lender’s credit risk onto a real person, who is much less likely to be insolvent than a startup company. The lender can underwrite the loan to the director’s personal finances rather than the company’s — which is faster and more predictable — and still call the product “business lending” because the actual borrower is the company. It is a comfortable way to lend small amounts to small companies and not have to do much real assessment of the business itself.
What we chose instead
We decided that if we were going to call ourselves a business lender, we should actually lend to the business. So our loans are made to the company — a limited company or an LLP — and only to the company. We do not ask the director to personally guarantee anything. If the company can’t repay, we have a claim against the company; we do not have a claim against the director’s house.
That is a meaningful business choice. It means we have to underwrite the company itself, not just the person behind it. We have to look at the bank-account history, the trading record, the affordability of the loan against current cashflow. It is more work to do well, but it is the work we think a business lender ought to be doing — and it is why our process puts that bank-account read at the centre instead of treating it as a tick-box.
The practical consequences
For a director, the consequences are clear: nothing they sign with us can be enforced against their personal estate. They are taking on a credit relationship as a director, in their company capacity, not as themselves. If the company fails, the loss falls where it should — on the business that took on the risk — not on the family home.
The other side of this trade-off is honest: because we don’t have a personal-guarantee fallback, we have to be more selective about who we lend to in the first place. We may decline a borderline applicant that a personal-guarantee lender would happily fund. That’s the point. We would rather not lend than lend in a way that pushes the cost of failure onto a director’s family.
What this means for our regulatory status
Because we lend only to bodies corporate (limited companies and LLPs) and never to individuals, our lending falls outside FCA consumer-credit regulation under Article 60B of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. This product is not covered by the Financial Ombudsman Service, the FSCS, or the Business Banking Resolution Service. After our internal complaints process, the next step is the courts.
That regulatory posture is partly the result of who we chose to be: a body-corporate-only lender, with no personal guarantee, doing real cashflow underwriting. We are honest that those protections don’t apply to our loans, and we treat the equivalent good-conduct expectations as a voluntary benchmark anyway. Our transparency page goes into detail on which standards we hold ourselves to and why.
If you want to compare
If you are comparing us to another short-term business lender and you can’t tell whether they want a personal guarantee, ask. Most will require one and the answer will be a paragraph buried in the agreement. The presence or absence of a personal guarantee is one of the most important things to understand about any small-business loan, because it determines whose money is actually on the line if things go wrong. We’ve made it as easy as possible to answer in our case: no, never, by design.
