Whether a personal guarantee is required under the Growth Guarantee Scheme is up to the accredited lender and depends on the facility and amount. The crucial scheme protection is that a lender cannot take your principal private residence (your main home) as security. The government guarantee is separate from any personal guarantee and does not reduce your liability — so read any guarantee carefully and understand your exposure before signing.
Key takeaways
- Personal guarantees may be required — it depends on the lender, facility and amount.
- Your principal private residence cannot be taken as security under the scheme.
- The government guarantee (to the lender) is not the same as a personal guarantee (from you).
- A personal guarantee makes a director personally liable if the business cannot repay.
- Guarantees can sometimes be capped — ask, and get advice before signing.
- Managing the facility well means a guarantee is never triggered.
Personal guarantees are one of the most important — and most worried-about — aspects of business borrowing. For directors considering the Growth Guarantee Scheme, the good news is that the scheme includes a significant protection: your main home cannot be taken as security. But guarantees and the government backing are often confused, so it pays to understand exactly what you may be asked to sign and what it means for you personally. This guide explains how personal guarantees work under the scheme and what to check before committing.
Two different guarantees — don’t confuse them
The biggest source of confusion is the word “guarantee,” because two completely different guarantees can be involved:
- The government guarantee is given by the scheme to the lender, compensating it for part of any loss if a borrower defaults. It reduces the lender’s risk but does not reduce your liability.
- A personal guarantee is given by you (usually a director) to the lender, promising to repay the business’s debt if the company cannot.
These are entirely separate. The presence of the government guarantee does not remove the possibility that a lender will also ask for a personal guarantee.
Will you need to give a personal guarantee?
It depends. Whether a personal guarantee is required under the scheme is at the accredited lender’s discretion and varies with the facility type and amount. Some lenders and facilities may not require one; others will. Because practice differs widely between accredited lenders, the only reliable approach is to ask each lender what it requires and to factor that into your choice.
The key protection: your home
The standout safeguard built into the scheme is that a lender cannot take your principal private residence (your main home) as security for scheme-backed lending. This is a meaningful protection that distinguishes scheme-backed finance from some ordinary secured commercial loans, which can involve a charge over property. For many directors, knowing their family home is protected makes the scheme more comfortable than alternatives that might put it at risk.
Under the Growth Guarantee Scheme, your main home cannot be taken as security — a protection that not all standard secured lending offers.
What a personal guarantee actually means
A personal guarantee makes the guarantor personally liable for the business’s debt, up to the guaranteed amount, if the company cannot repay. That means a lender could pursue you personally if the business defaults. While the scheme protects your main home from being taken as security, other personal assets may still be within scope depending on the guarantee. This is why a personal guarantee is a serious commitment that deserves careful thought.
Can a guarantee be limited?
In some cases a personal guarantee can be capped at a set figure rather than being unlimited. Whether this is possible depends on the lender. If a guarantee is required, it is entirely reasonable to ask whether it can be capped and to make sure you understand exactly what triggers it and what your maximum exposure would be. Negotiating the terms of a guarantee is part of comparing offers.
Before you sign: what to check
- The amount guaranteed — is it capped or unlimited?
- What triggers it — the circumstances in which the lender can call on it.
- Your potential exposure — which of your assets could be affected (your main home cannot).
- How it is released — confirm it falls away when the facility is repaid.
- Joint guarantees — if several directors guarantee, understand your individual liability.
Because a personal guarantee is significant, it is wise to read the documents carefully and seek independent legal or financial advice if anything is unclear.
Managing the risk
The most effective way to protect yourself is to ensure the guarantee is never called upon — by borrowing an amount the business can comfortably afford, managing the facility responsibly, and communicating early with the lender if circumstances change. A well-run facility means the guarantee simply falls away on repayment, and you build a positive track record that helps future borrowing. Giving a guarantee may be considered in future personal lending decisions, so keeping it dormant and then released is in your interest.
Want to avoid a personal guarantee entirely?
Some accredited lenders and facilities may not require a personal guarantee at all, but this is not guaranteed. If avoiding one is a priority, raise it early and compare accredited lenders, since appetite varies. A commercial finance broker can help identify lenders whose requirements fit your preferences, and you may also wish to read our wider guidance on unsecured business lending.
The bottom line
Under the Growth Guarantee Scheme, a personal guarantee may or may not be required depending on the lender and facility — but your principal private residence cannot be taken as security, which is a valuable protection. Keep the government guarantee and any personal guarantee clearly separate in your mind: the former protects the lender, the latter exposes you. Read any guarantee carefully, ask about caps, seek advice if unsure, and manage the facility well so the guarantee is never triggered.
Frequently asked questions
Does the Growth Guarantee Scheme require a personal guarantee?
It is at the accredited lender’s discretion and depends on the facility and amount. Some facilities require a personal guarantee from directors; others may not. There is, however, an important scheme protection: a lender cannot take your principal private residence as security.
Can a lender take my home under the scheme?
No. A key protection under the Growth Guarantee Scheme is that a lender cannot take your principal private residence (your main home) as security for scheme-backed lending. This distinguishes it from some ordinary secured commercial loans.
What is a personal guarantee?
A personal guarantee is a promise by an individual, usually a director, to repay the business’s debt if the company cannot. It makes the guarantor personally liable up to the guaranteed amount, so it is a serious commitment that should be understood before signing.
Does a personal guarantee mean I owe the debt personally?
It means that if the business defaults, the lender can pursue you personally for the guaranteed amount. The protection under the scheme is that your main home cannot be taken as security, but other personal assets may still be within scope depending on the guarantee.
Why do lenders ask for personal guarantees?
A personal guarantee aligns the director’s interests with repayment and gives the lender additional recourse if the business fails. Even with the scheme’s guarantee reducing the lender’s risk, a lender may still seek a personal guarantee depending on the facility and its assessment.
Is the government guarantee the same as a personal guarantee?
No. The government guarantee protects the lender against part of its loss and is arranged between the lender and the British Business Bank. A personal guarantee is given by you to the lender. They are entirely different, and the government guarantee does not reduce your liability.
Do all accredited lenders require a personal guarantee?
No. Requirements vary by lender, facility and amount. Some lenders may not require one for certain facilities; others will. Because practice differs, always check what a particular lender requires before applying.
What assets can be used as security under the scheme?
Security requirements depend on the lender and facility, but the scheme specifically prevents a lender taking your principal private residence as security. Business assets and certain other security may still be relevant, so confirm the details with the lender.
Should I get advice before signing a personal guarantee?
Yes. A personal guarantee is a significant commitment, so it is wise to read it carefully and seek independent legal or financial advice if you are unsure. Understand the amount guaranteed, what triggers it, and your potential exposure.
Can I limit a personal guarantee?
In some cases a personal guarantee can be capped at a set amount rather than being unlimited. Whether this is possible depends on the lender. If a guarantee is required, it is reasonable to ask about a cap and to understand exactly what you are agreeing to.
What happens to my guarantee if the business repays the loan?
Once the facility is fully repaid and any obligations discharged, the personal guarantee typically falls away. Confirm with the lender how and when the guarantee is released, and obtain confirmation in writing once the debt is cleared.
Does a personal guarantee affect my personal credit?
Giving a guarantee may be recorded and could be considered in future personal lending decisions, and if it is called upon it can affect your personal credit. Managing the business facility well so the guarantee is never triggered protects your position.
If there are several directors, who gives the guarantee?
Lenders may ask one or more directors to provide guarantees, sometimes jointly. The arrangement depends on the lender and the business’s ownership. Each guarantor should understand their individual exposure before signing.
Is the home protection guaranteed in writing?
The protection on your principal private residence is a feature of the scheme. Even so, you should read your facility and any guarantee documents carefully and confirm with the lender how the protection applies to your specific agreement.
Can I get scheme-backed finance with no personal guarantee at all?
It is possible with some lenders and facilities, but not guaranteed. If avoiding a personal guarantee is important to you, raise it early and compare accredited lenders, as appetite varies. A broker can help identify lenders whose requirements suit you.
How does this compare to a standard secured loan?
Some ordinary secured commercial loans can involve a charge over property, potentially including a home. The scheme’s protection of your principal private residence is therefore a meaningful safeguard that not all standard secured lending offers.
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Get your free quoteThis article is general information, not financial advice. Eligibility, rates and terms vary by lender and your circumstances. The Loans Hub is a finance broker, not a lender.
