Personal Guarantee Insurance is available for Personal Guarantees provided by Directors of Limited Companies or Partners of Limited Liability Partnerships located in the United Kingdom.
Personal Guarantee Insurance is available against a wide range of business loans, including invoice finance, asset-based loans, commercial mortgages, peer-to-peer loans, development loans and more.
Why not have an informal chat and make sure that you are not risking your personal estate unnecessarily.
Please reach us at hello@sjrobins.com if you cannot find an answer to your question.
A Personal Guarantee is – in a nutshell – a person’s promise to repay credit issued to their business (they’re usually a director or partner of the business) and is typically signed during the loan application process. It’s a legally binding contract.
Small business owners will often use a Personal Guarantee, as they have a vested interest in the success of their business.
If the business becomes unable to repay this debt at any point, then the individual who has signed the Personal Guarantee may become personally responsible for the debt. The lender may call on the Personal Guarantee to cover any outstanding debts and will go after the guarantor’s personal assets, such as their home. If personal assets don’t cover the debt, the individual could be declared bankrupt.
As we all know, not all businesses succeed and, as a result, not all debt is paid back. The Personal Guarantee is therefore seen as “added security” for lenders.
Few SMEs have enough cash within their organisation to self-fund growth. So Personal Guarantees can be a very useful method of securing crucial business finance that an SME may not have been able to secure otherwise, and could help propel a business forward.
If this happens, you are personally liable for the debt. Your lender will send you a request for payment in full, they will request the ‘crystalised’ amount (i.e. the final bill for what you owe). This is the amount they will pursue you for if you do not pay.
Usually from this point on, they will also add further interest, default charges and legal fees. So, your liability can continue increasing.
If you do not pay, your lender will begin legal proceedings against you. This mainly takes two forms:
1. Obtaining a judgment
This is a court order officially recognising your debt. After securing a judgement, the lender will apply for an Order Charging Land to be placed on your home or properties. This order means that if you ever sell the property that you must give a certain amount to the lender
.
2. Statutory demand and bankruptcy
A statutory demand is a formal request to repay a debt. Unlike a judgement, it is not a legal document and does not require court action. However, it can be as, if not more, serious. A statutory demand is the first step to making you bankrupt. You can read more about the impact of bankruptcy here. If you have received a statutory demand as a result of a personal guarantee, you have 18-21 days to take action.
Regardless of the method, your personal finances as well as your home and assets become at risk. Your lender will look to recover money the easiest way, usually this is through your residential home but may also include investments or other properties.
When you, as a business owner or director, sign a Personal Guarantee, you’re essentially putting your personal assets on the line, most notably your home. If your business can no longer repay the loan you took out, you, and potentially your family, could suffer as a result.
This is where Personal Guarantee Insurance comes in. It’s designed to give you the confidence to grow your business through securing crucial finance, and protect your personal assets.
There are many unforeseen circumstances that can have adverse effects on your business and your bottom line, from market downturns and key customers going out of business to suppliers failing in their duty and illness or absence of a key individual within the company.
PGI can be tailored to each individual, so you can state the amount you want to insure, and you can choose how many directors you’d like to be noted on the policy. Purchasing this insurance policy will help to reduce the risk to your personal estate, leaving you to get on with running your business and securing your financial peace of mind.
Personal Guarantee Insurance (PGI) is provided by Purbeck Insurance Services, whose Policies are backed by Markel International Insurance Company Ltd. The Markel Corporation has been around for over 90 years, and is an A rated insurer as rated by A.M. Best (A), Fitch (A+) and S&P (A) - so you’re in safe hands!
PGI is available to Directors of Limited Companies or Partners of Limited Liability Partnerships based in the UK.
Purbeck can cover PGs attached to a wide range of business loans, including asset finance, commercial mortgages, invoice finance, overdrafts, peer to peer loans and other secured or unsecured loans. If in doubt, we would recommend speaking with a member of the Purbeck support team to see if your current requirement is insurable.
Purbeck offer a maximum level of cover of £550,000 for secured loans and £400,000 for unsecured loans.
No problem! You can add up to five Directors to one Policy at no extra cost if the PG has been signed ‘jointly and severally’.
Purbeck can group certain PGs together on one Policy. If you have two PGs attached to secured lending, for example, you could have one Policy that covers them both.
PGI is an annual Policy - every year the Purbeck team will get in touch to discuss your requirements and issue a new 12-month premium that reflects the most accurate PG amount. Typically, as you pay off your loan, your sum insured will reduce and your premiums along with it!
Premiums are calculated on a case-by-case basis, so it’s hard to give an accurate indication. As a rough guide though, premium rates are somewhere between 1.6% and 3.6% of the PG amount.
Not at all - you can either pay up front or across the year via Direct Debit (charges apply).
Purbeck charge an arrangement fee of between £100 and £500 per Policy. The fee must be paid up front, within 30 days of the Policy inception.
We would recommend that you investigate PGI once you have secured a loan offer – you will then be in the best position to provide the most accurate information regarding your loan and also receive the most accurate premium rates and information from Purbeck, avoiding any changes that may occur if you get in touch too soon.
Once Purbeck have received your completed application, they will aim to contact you within 24 hours to have an initial discussion about your requirements. Often, they will require more management information to assess the current strength of your business and underwrite the risk appropriately, so this can take a little time depending on how quickly you can provide it. However, for a straightforward case that requires no further information, PGI can be set up within a matter of hours!
Get in touch today for a no-obligation quote by completing a manual application form or clicking the link below to access it online. A member of the our team will be in touch shortly after to have an informal discussion about your requirements.
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