What is a personal guarantee?
When a company borrows, the lender often asks the directors to stand behind the loan personally. Here is what that commitment means.
Written by Matt Vincent DipFA, CeMAP, CeRER, BSc · Published 25 June 2026 · Version 1.0 · 5 min readA personal guarantee (often shortened to "PG") is a promise by an individual, usually a company director or owner, to repay the company's loan personally if the company can't. It bridges the gap between a limited company (which has limited liability) and the lender (which wants someone on the hook).
Why lenders ask for them
A company, especially a newly formed SPV, may have few assets and no track record of its own. A personal guarantee gives the lender recourse to a real person with real assets if the loan goes bad. It's a very common requirement for company commercial and investment mortgages.
How they usually work
- They're often limited or capped, for example to a percentage of the loan, rather than unlimited.
- They can be called in if the company defaults and the property sale doesn't cover the debt.
- Lenders frequently recommend (or require) you take independent legal advice before signing, so you understand what you're agreeing to.
- Specialist personal guarantee insurance exists to cover part of the exposure.
Pros
- Often the thing that makes lending to a company possible
- Can help secure better terms or a larger loan
- Usually capped rather than unlimited
Cons
- Your personal assets (savings, and potentially your home) are exposed
- It can be called in if the company can't pay
- Multiple directors may be "jointly and severally" liable, each potentially for the whole amount
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This guide was published on 25 June 2026 (version 1.0) and reflects our understanding at that time. It is general information about commercial mortgages, not financial advice or a recommendation. Lending criteria, interest rates and tax rules change over time, so please confirm current details with a qualified advisor before acting. Reference: PL-CM-PERSONALGU-v10.