Personal Guarantees on the Growth Guarantee Scheme: The Rules

By Andy Pickett · Chief Technology Director and AI Champion

Published 12 June 2026 · About the author

The growth guarantee scheme personal guarantee question worries directors more than any other part of the scheme — and with good reason, because the rules are widely misunderstood. Many assume the government guarantee removes personal risk. It does not. This guide explains when personal guarantees apply to Growth Guarantee Scheme funding, the one protection that always applies, and how to limit your exposure.

What is a personal guarantee?

A personal guarantee (PG) is a legal promise by an individual — usually a director or owner — to repay a business debt personally if the business cannot. It bridges the gap created by limited liability: the company borrows, but the lender can pursue the guarantor’s personal assets if the company defaults.

A PG is not the same as security. Security gives the lender a charge over a specific asset. A PG is a personal promise that the lender enforces through the courts if needed. Both can sit alongside each other on the same facility — our guide to secured vs unsecured business loans explains the distinction in depth.

Does the Growth Guarantee Scheme require a personal guarantee?

No — and it does not prohibit one either. Scheme rules leave personal guarantees at the discretion of each accredited lender, in line with their normal commercial lending practice. The 70% government guarantee protects the lender against loss; it does not replace the lender’s usual approach to borrower security.

In practice, this means the same £150,000 facility could come with a full PG from one lender, a capped PG from another, and no PG from a third. The lender’s product type, your credit profile and the facility size all influence the decision.

The principal private residence protection

One borrower protection is hard-wired into the scheme: a lender cannot take your principal private residence — your main home — as security for a Growth Guarantee Scheme facility. This rule carried over from the Recovery Loan Scheme and applies to every accredited lender.

Understand precisely what it covers. The rule stops the lender taking a charge over your main home as security for the facility. It does not make a personal guarantee meaningless: if a PG is enforced through the courts, your wider personal assets are still exposed to the judgment. The protection is real and valuable, but it is about security, not total immunity.

Second homes, buy-to-let properties and other personal assets sit outside the protection and can be offered as security if you choose.

How common are PGs on scheme lending?

More common than most directors hope, less universal than they fear. On unsecured term loans above roughly £50,000, a personal guarantee request is the norm across most of the accredited panel. On smaller facilities, practice splits: some lenders waive PGs entirely below their internal threshold, others ask regardless of size.

Asset finance sits at the other end of the spectrum. Because the funded vehicle or machine provides security, many asset finance agreements complete with a limited guarantee or none at all. Invoice finance behaves similarly: the debtor book carries the risk, and guarantees are often restricted to specific warranties — for example, that the invoices are genuine — rather than the whole debt.

The honest summary: if you want a meaningful unsecured facility with no PG of any kind, your options narrow sharply. If you can accept a sensibly capped guarantee, most of the market opens up. For how repayments and structures work across these products, see how business loans work.

When lenders ask for a personal guarantee

Patterns are consistent across the accredited panel, even though policies differ:

• Unsecured term loans — PGs are most common here, because the lender has no asset to fall back on.
• Larger facilities — the bigger the exposure, the more likely a PG becomes.
• Thin or mixed credit files — a PG is often the price of a yes for borderline applications.
• Asset and invoice finance — PGs are less central, because the asset or debtor book provides security; where used, they are often capped or limited to specific risks.

Some lenders waive PGs on smaller facilities. Lender choice is therefore the single biggest lever you have — our guide to Growth Guarantee Scheme lenders explains how appetite varies across the panel.

How personal guarantee terms vary by lender

Two PGs are rarely the same. Before signing, understand the moving parts.

Full vs capped guarantees

A full PG covers the entire debt plus interest and costs. A capped PG limits your exposure to a fixed sum or a percentage of the facility. Caps are common and frequently negotiable, especially where the lender already holds some security.

Joint and several liability

Where multiple directors sign, lenders usually take guarantees on a joint and several basis. That means the lender can pursue any one guarantor for the full guaranteed amount, not just their share. Agree privately between guarantors how exposure would be split, ideally in a contribution agreement.

Interest, costs and demand terms

Check whether the guarantee covers default interest and recovery costs on top of the principal. Check what triggers a demand, and whether the lender must exhaust company recoveries first. These clauses differ meaningfully between lenders.

Release conditions

Ask when and how the guarantee falls away. Some lenders will agree to release or reduce a PG once part of the loan is repaid or covenants are met. If it is not in writing, it does not exist.

What a PG means for directors in practice

While the business pays on time, a personal guarantee sits dormant. It bites on default: the lender recovers what it can from the company, then demands the shortfall from guarantors. If a guarantor cannot pay, the lender can seek a court judgment and enforce against personal assets — subject to the principal private residence rule on security.

The government guarantee changes none of this. It reimburses part of the lender’s residual loss after recoveries; the borrower and guarantors remain liable for 100% of the debt. Treat any PG as a real commitment sized against your personal balance sheet, and take independent legal advice before signing — many lenders require it.

A worked example: what enforcement actually looks like

Numbers cut through the fear. Take a director who signs a personal guarantee capped at 40% on a £200,000 GGS term loan.

Two years in, the company fails owing £120,000. The sequence runs like this:

• Company recoveries first. The lender recovers £40,000 from business assets through the insolvency, leaving an £80,000 shortfall.
• The guarantee is called. The cap is 40% of the £200,000 facility, so the director’s maximum exposure is £80,000 — here, the full shortfall is demanded.
• The government guarantee operates separately. If the director cannot pay in full, the scheme reimburses the lender 70% of its residual loss. This happens between the lender and the government; it does not reduce the director’s debt by a penny.

Now rerun the failure with a 20% cap negotiated at the outset. Maximum personal exposure falls to £40,000 — half the shortfall — and the rest is the lender’s commercial risk. Same loan, same failure, £40,000 difference to the director’s family finances. That is why the cap negotiation matters more than almost any other term.

Note what did not happen in either version: the director’s home was never on the table. The principal private residence rule held throughout, although other personal assets — savings, vehicles, a buy-to-let — remained exposed to the judgment.

Should you accept the guarantee? A decision framework

Work through four questions before agreeing to any PG:

• 1. What is my worst-case number? Read the guarantee and write down the maximum you could owe, including interest and costs. If you cannot find that number in the document, ask for it in writing.
• 2. Could I pay it without selling my home? The scheme protects your main residence from being taken as security, but a judgment still reaches savings and other assets. Size the worst case against what you could genuinely cover.
• 3. Does the upside justify it? A guarantee backing a machine that doubles capacity is a different bet from one backing wages in a struggling quarter. Be honest about which you are signing.
• 4. Have I tested the alternatives? A capped PG, business security, asset finance or a different lender may achieve the same funding with less personal risk. If you have only one quote, you have not tested anything.

If the worst-case number is survivable and the purpose strengthens the business, a PG can be a perfectly rational trade. If either answer is no, keep negotiating or keep shopping.

Questions to ask before you sign

Put these to the lender in writing and keep the answers:

• Is the guarantee capped, and at what amount?
• Is liability joint and several with other guarantors?
• Does it cover interest and recovery costs, or principal only?
• Must the lender pursue the company’s assets before demanding from me?
• What are the conditions for reducing or releasing the guarantee?
• Can I substitute other security to remove the PG later?

A lender’s willingness to answer clearly is itself useful information about how it will behave if things get difficult. Vague answers on caps and release terms now usually mean inflexibility later. Keep every answer with the signed documents, because the people you negotiated with will not be the people handling any future recovery.

How to reduce personal guarantee risk

You have more leverage than you might think, especially with a strong application.

• Negotiate a cap. A PG capped at 25–50% of the facility is a common outcome where the ask is reasonable.
• Offer business security instead. A charge over business assets can reduce or remove the need for a PG.
• Consider personal guarantee insurance. PGI policies typically cover a substantial portion of your guaranteed exposure for an annual premium, and cover can often step up over time.
• Choose the product deliberately. Asset finance and invoice finance lean on the funded asset, which usually softens PG requirements.
• Compare lenders. The spread of PG policies across the accredited panel is wide — use it.

Model the facility itself with our business loan calculator so you negotiate the guarantee against a repayment plan you are confident in.

Common mistakes directors make with personal guarantees

• Assuming the government guarantee protects them. It protects the lender. This single misunderstanding causes more grief than every other clause combined.
• Signing without reading the costs clause. Default interest and recovery costs can add materially to the headline cap. Know whether your cap is all-in.
• Not negotiating at all. Lenders expect questions about caps and release terms. Accepting the first draft leaves money on the table.
• Ignoring joint and several exposure. Co-guarantors who never agree a contribution split discover the problem at the worst possible moment.
• Forgetting the guarantee exists. PGs signed years ago survive refinances and director changes unless formally released. Keep a register and ask for releases in writing when facilities are repaid.
• Skipping independent legal advice. Many lenders require it; all guarantors need it. An hour with a solicitor is cheap against a six-figure commitment.

For context on how guarantees fit into the wider state-backed lending picture, our overview of government business loans in the UK compares the protections across schemes.

Alternatives if you will not give a personal guarantee

Refusing a PG narrows the field but does not end the search. Realistic routes include:

• PG-free scheme lenders. Some accredited lenders do not require PGs on smaller facilities — a broker can identify current appetite quickly.
• Secured borrowing. Offering business assets as security changes the lender’s risk equation. See our unsecured business loans page for how lenders treat the unsecured route, and our comparison of secured vs unsecured business loans for the trade-offs.
• Invoice finance. Your debtor book carries the risk, which reduces reliance on personal commitments.
• A smaller facility. PG requirements often soften below each lender’s internal thresholds.

Be realistic about the trade: removing personal risk usually costs something in rate, facility size or product choice. Check you meet the underlying criteria first in our Growth Guarantee Scheme eligibility guide.

Your next step

Personal guarantee terms are one of the most negotiable parts of a Growth Guarantee Scheme facility — but only if you compare lenders before committing. As an FCA-authorised commercial finance brokerage, we know which accredited lenders currently lend with no PG, capped PGs or flexible release terms. Start on our Growth Guarantee Scheme funding page and we will match you to lenders whose security requirements fit what you are willing to give.

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Written by

Andy Pickett

Chief Technology Director and AI Champion

Andrew is a Chief Technology Officer with over 15 years’ experience in IT and telecommunications, leading the design and delivery of robust, scalable technology solutions.

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