A Personal Guarantee (PG) is a legally binding promise by a business owner or shareholder to repay a business loan using their own personal assets if the company fails to pay.
For many SME financing facilities, particularly non-collateralized facilities, a Personal Guarantee is a standard requirement.
Who is expected to give the personal guarantee?
This depends on the lender and financing facility.
For many SME financing facilities, a shareholder holding more than 30% local shareholding is expected to come in as a Personal Guarantor.
However, requirements can differ between lenders. For example:
- Some banks or financial institutions may require shareholders with 51% or more shareholding to provide a PG.
- Some banks may require shareholders with 5% or more shareholding to provide a PG.
- Certain cases may require additional directors or shareholders to come in as guarantors.
The exact PG requirement is assessed case by case based on the lender, financing facility and ownership structure.
How is the guarantor personally liable?
If the company defaults on its repayments, including if the company becomes insolvent or goes bankrupt, the lender can enforce the Personal Guarantee against the guarantor to recover the outstanding amount.
This means the guarantor’s personal assets can be used to recover the amount owed, subject to the terms of the guarantee and applicable law.
Speak to us about your financing requirement
If your company is considering SME financing, send us your company name, approximate amount required and purpose of funding.
We can assess the profile and determine which financing routes may be worth considering.
