Personal Guarantee Insurance
When applying for a business loan, many lenders require directors to sign a personal guarantee. This makes you personally liable if the business can’t repay. It’s often the difference between securing vital finance, or being declined.
But it also puts your home, savings, and personal wealth at risk. That’s where Personal Guarantee Insurance (PGI) steps in, giving directors confidence to borrow while protecting their personal assets.
What is Personal Guarantee Insurance?
Personal Guarantee Insurance is an annual insurance policy designed to protect directors who have signed a personal guarantee in support of a business loan.
If your business becomes insolvent and the lender calls on your guarantee, the policy covers a fixed percentage of your liability, significantly reducing personal financial exposure.
How it Works
- Secured Loans: Cover is available up to 80% from year one, with a maximum insured sum of £550,000.
- Unsecured Loans: Cover starts at 60% in year one, rising to 70% in year two and 80% from year three onwards, with a maximum insured sum of £300,000.
- Premiums: Typically range from 1.6%–2.6% of the guaranteed amount for secured loans, and 2.4%–3.6% for unsecured loans (plus 12% IPT).
Added Value Beyond Insurance
With PGI, you’re not just buying a safety net, you’re gaining access to expert support services, including:
- Business recovery and restructuring advice
- Cash flow and credit control management
- Debt negotiation and dispute resolution
- Up to £10,000 of legal fees to help mitigate lender demands
This proactive support can often help businesses avoid default in the first place.
Why It’s Relevant for Unsecured Loans
When lenders can’t secure against business assets, they rely more heavily on personal guarantees. That makes PGI particularly valuable in unsecured loan arrangements, giving peace of mind to directors who might otherwise hesitate to take on this personal liability.
Pros for Business Owners
- Protects personal wealth, reduces risk to your home and savings
- Encourages growth, borrow with confidence to fund expansion
- Covers new or historic guarantees, and even multiple directors or guarantees under one policy
FAQs
Can I insure existing guarantees?
Yes, cover is available for both new and historic personal guarantees.
What if more than one director signs the guarantee?
Additional directors can be added to the same policy if signed jointly & severally.
Is it only for large loans?
No, PGI applies to a wide range of facilities, from asset finance and invoice finance to unsecured working capital loans.
Conclusion
Signing a personal guarantee can unlock essential funding, but it doesn’t have to put your personal assets at risk. Personal Guarantee Insurance gives directors peace of mind, protecting against the unexpected while allowing your business to grow.
Need finance but worried about personal guarantees? At Peak Business Finance, we can help you arrange the right loan, and protect yourself with Personal Guarantee Insurance at the same time. Speak to us today.