Ask The Experts > Directors Guarantee

A Guarantee has four specific meanings:

• A written assurance that some product or service will be provided or will meet certain specifications. This is also known as a warranty.
  
  
• A pledge or undertaking that something will happen or that something is true.
  
  
• A secondary agreement to answer for the debt of another in case that person or company defaults.
  
  
• To stand behind.

In relation to a Directors' Guarantee, often banks or creditors call on directors to give their personal guarantee in respect of debts of the company. Directors' guarantees are more often called for when the company is small in size or has limited assets of its own to support the loan should the company fail to pay. However, even in many cases when the business can support the loan it is policy of most banks to take directors' guarantees.

What this means for a director who is personally guaranteeing the debts of the company is that if the company fails to pay its debts the guarantor, that is the director, can be only be sued if the company cannot pay its debts. Normally, a lending institution will exhaust the assets of the company before it calls on the directors to meet its obligations.

At Business Money we try to limit the directors' guarantees taken by the lending institutions. In fact we have access to a few lenders who only require a directors' guarantee in respect of fraud or non performance and one that does not require a directors' guarantee at all. That is, your business loan can be a truly unsecured loan.

Contact Business Money today to find out how this might apply for your company.

Back to Ask the Experts