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Independent Banking Advisory Service |
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Personal Guarantee or Personal Guarantees Bank Guarantees, Personal Bank Guarantee, Personal guarantees and Personal Guarantees for SFLGS are taken by Banks and lenders in a number of different circumstances, usually to provide additional security for borrowing. Proprietors, partners and directors of limited companies provide personal bank guarantees for their company's borrowings so that the bank has additional banking security to that already in place. A guarantor undertakes that he or she will repay the debt incurred to the bank by another person or company or other creditor. The bank or other creditor can require him or her to pay the outstanding amount if that person or company which is the principle borrower cannot (or will not) pay their indebtedness. Banks will, in most circumstances require any guarantee to be secured, that means they will seek a legal mortgage over a proprietor’s, director's or partner’s house. The same will occur if the guarantor is an unconnected third party. In the case of co-guarantors each guarantor will be fully liable for the outstanding amount subject to their guarantee. However, co-guarantors need to resolve their respective business obligations between themselves and need a properly formulated and legal ‘exit’ strategy should they resign their partnership or directorship or ‘pass’ their business on to others in any way. If you are looking at this page is it because you have concerns regarding your own position with a Personal Guarantee? Example A: The following statement is posted: "The fact that IBAS have the knowledge and provide assistance in formulating the strategy, which was provided to me under membership and which provided the necessary case law ammunition and support (letters continually making the correct points) to prevent the bank gaining the upper hand (preventing me making offers which I wanted to make, just to get this case against me closed, and which would have destroyed any defence) - that strength of position then also enabled me to 'face off' the bank's threat (although the bank/solicitors knew their claim was flawed) and this strength of resistance then forced them to discontinue their action - this is all a matter of fact and something which IBAS should be very pleased about." This case illustrates just how cautious a guarantor needs to be and also how IBAS guides those with PGs for their best interests in any resolution. What does IBAS membership offer you? Example B: Mr A’s Father in law (Jack) wanted to help in Mr A's business expansion - so the bank sought a personal guarantee from Jack and also his wife (Judy) for a guarantee for 40k. The guarantees was also secured on Jack & Judy’s house as the bank had requested. The bank lent up to the limits of the overdraft agreement with Mr A and often beyond it. Jack and Judy did not work for Mr A’s business and had no control over the business borrowings. Mr A then left their daughter and a divorce coincided with the business failure. The bank issued a formal demand to Jack & Judy for of 40k plus interest, plus costs. Mr A had considerable debt and his unsecured creditors petitioned for his bankruptcy. There was a considerable sum left outstanding to the bank. As the bank had obtained guarantees with security it meant that Jack & Judy were facing a 40k plus debt to the bank after Mr A’s bankruptcy. The bank requested payment but as the bank didn’t ‘push’ for repayment Jack & Judy thought they’d just ‘gone away’. However, some ten years later Jack & Judy wanted to plan an anniversary party and an overseas holiday trip. They applied for a remortgage on their home to do this. This immediately prompted a demand for full payment from the bank. The debt was then considerably more than 40k and secured under the bank’s mortgage for payment. The bank was now less ‘friendly’ - and they added interest for the 10 year period and threatened legal action would be taken to obtain full payment. Note: Bank loans, business loans, overdrafts and mortgages may be covered by personal guarantees or bank guarantees. The above is not an unusual scenario and many personal guarantees are provided to Banks or lenders too easily by partners, directors and spouses, other relatives, friends and even business acquaintances. Often, guarantors have little or no input or control with business borrowings or the increased volume of business borrowings on which they have provided guarantees. A hastily provided signature may prove to be a very costly error and then a stressful experience. Many guarantors
seek our assistance,
realizing their
personal position is at serious risk from an undetermined guarantee. Unfortunately,
even by responding to the bank's first letter, by telephoning the bank after
it's receipt can destroy possible defences, which may have been available. It
IBAS
Our advice will fully identify your position and
also the options open to you. We will assess, investigate and negotiate direct
with the lender on your behalf under our membership, which is a 'one-off' membership of just £395.
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