Stef’s market update – October 2026 – personal guarantees: how to protect yourself when borrowing for your business

Why it’s worth looking at Personal Guarantee Insurance when arranging business finance

One of the things we spend a lot of time talking about at Evolve is how businesses can fund their plans for growth. That might mean buying new equipment, taking on larger contracts, buying another business or simply making sure there’s enough cash available to keep things running smoothly.

But there’s another part of the funding process that’s worth giving some thought to and that’s the personal guarantee. Many business owners will be familiar with personal guarantees particularly if they’ve borrowed money before. They’re a common feature of commercial lending and, depending on the type of finance and the lender, directors may be asked to provide one as part of the deal.

A personal guarantee means that if the business can’t repay what it owes, the lender may be able to seek repayment from the person who signed it. That’s quite a commitment especially when you’re putting your own finances behind a business loan. Of course, lenders have good reasons for asking for guarantees. They’re taking on risk when they lend money and a personal guarantee can give them added security. For some businesses, agreeing to one may also help them gain access to funding that might otherwise be hard to secure.

But I think it’s important that directors understand exactly what they’re signing, how much they could be liable for and what it might mean for them personally if things don’t go to plan.

Where Personal Guarantee Insurance comes in

One way business owners can protect themselves is through Personal Guarantee Insurance (PGI). We work with Purbeck Insurance which provides cover designed to protect directors who have given a personal guarantee in support of business borrowing.

The idea is fairly simple. If a lender calls on a personal guarantee following a covered event, the insurance can pay an agreed percentage of the director’s liability, subject to the terms and conditions of the policy. I think this is a useful option for business owners, particularly those who have spent years building up their business and may have a lot of their personal wealth tied up in it. Taking on finance can help a business grow, but it’s reassuring to know that there are ways to reduce some of the personal risk that comes with it.

PGI doesn’t remove the guarantee and directors still need to understand what they’re signing. But having insurance in place can provide an extra level of protection if the business runs into trouble.

Making PGI part of the funding conversation

When we’re arranging finance we spend a lot of time looking at the cost of borrowing, repayment terms and whether the facility will meet the client’s needs over the coming years. I think it’s just as important to look at the personal commitments directors may be asked to make.

They need to consider the risks that come with borrowing and look at ways to protect themselves at the same time. For someone taking out a loan to buy new equipment, fund an acquisition or provide more working capital, that added peace of mind can be valuable. It’s also worth knowing that PGI isn’t just for new borrowing. Business owners who already have personal guarantees in place may be able to arrange cover for those existing commitments too.

I’ve always felt that our role as a broker goes beyond finding a lender and getting a deal over the line. We want clients to understand the finance they’re taking on and feel comfortable with the decisions they’re making.

If you’re looking at new business finance or have an existing personal guarantee, speak to us at Evolve. We can talk you through the insurance options available and help you decide whether PGI could be useful for you.