1. What is a Personal Guarantee?
When a business owners or directors of small to medium enterprises (SMEs) secure a loan, invoice financing or overdraft from banks and other lending institutions a “Personal Guarantee” is usually required as extra security and ‘sits’ behind a debenture and a fixed and floating charge.
A personal guarantee is a contract by which someone promises to pay any deficiencies on a specific loan or account which cannot be met by the principal debtor. Most guarantee forms require joint and several liability, meaning that each individual who signs a guarantee can be held responsible for the whole amount of the loan. Consequently, even if someone is only a 10 percent owner in the business, that person is personally liable for 100 percent of the amount being guaranteed. The guarantors can be sued individually or all together. There is no requirement that, before the guarantor can be held responsible, the lender must show that the borrower actually named in the loan document, e.g. the business, has been asked to repay the loan. In effect, when a personal guarantee is signed, the signer becomes personally liable for the loan, even if the business is incorporated.
In the majority of cases, the amount payable under the Personal Guarantee will equate to the quantum outstanding when called upon the by the lender in the event of the company or business entering into a formal insolvency procedure.
2. I have had to give a Personal Guarantee to my lender how will PG insurance safeguard my business interests?
An on-going challenge faced by business owners is an increasing demand for security from lending institutions mandated by their routine lending policies. PG Insurance is tailored for Directors who are exposed by having provided Personal Guarantees (PG), by indemnifying a set proportion of the liability.
3. What does the Personal Guarantee Insurance give me?
The insurance will pay out a stated percentage of your liability under your PG. It is capped after 5 years at 90% of a maximum PG of £1.5m. The amount of cover is dependent on the value of the PG given and the length of time the insurance has been in place.
There is a Business Support Help Desk and optional Monitoring Service to underpin the Insurance Cover. It creates the opportunity to build your business long term by providing access to specialist advisors before small problems become big ones. Owners will always face uncertainties; the environment, the economy ad legislation to name a few. In the event of an unforeseen occurrence the knock on effect may have devastating effects on a business.
PG Insurance is tailored for Directors who are exposed by having provided Personal Guarantees. PG insurance gives you “peace of mind” as it is designed to actively safeguard your business interests and provide insurance cover if your Personal Guarantee (PG) is called upon by your lender.
PG insurance provides a tapered percentage of insurance cover of the called amount of the PG on an annual incrementing basis when the Insured’s business enters an insolvency mechanism.
PG Insurance is available for lending supporting by a debenture, a fixed charge, a mortgage, or HP or lease finance on assets significant re-sale value.
4. Why hasn’t an Insurance Policy to cover a Personal Guarantee been available before?
PG Insurance has been developed to take advantage of the trend of lenders to request that Directors provide Personal Guarantees, and to provide a mechanism to help turnaround business that may experience problems.
5. Why is PG Insurance such an innovative new business Insurance Policy?
Our understanding is that PG Insurance is the first insurance in the UK to insure a Personal Guarantee. WE believe it to be the only insurance of its type in the world.
PG Insurance gives insurance cover underpinned with Business Support Services which provide help & information that can make all the difference, when you need it most.
6. What are the benefits of the Business Support Services?
You have unlimited use of the Business Support Help Desk to immediately address any business concerns when they arise, and the optional bespoke Monitoring Service. In this current economic climate, Company Directors need access to relevant knowledge and information as immediate reliable advice makes all the difference.
The Optional Monitoring Service & Business Support Help Desk is an essential business support package that:
Provides an early warning
Allows you to be in control
Delivers help directly to you from trusted advisors
Assists you in making informed business decisions
The Business Support Help Desk will endeavour to assist you in receiving independent advice that is right for you to address the symptoms and resolve causes in so far as the advisors are able. The Optional Monitoring Service performs a daily check for any new County Court or High Court Judgments, Winding-up Petitions or for a decline in credit score rating for your business and your chosen businesses.
With the Business Support Help Desk, you have unlimited telephone access and an email response giving access to independent professional advisors on topics such as; debt recovery, business recovery, insolvency, business growth, Employment Law and Health & Safety.
On a daily basis, the Optional Monitoring Service automatically monitors your business and up to 10 Chosen businesses, either customers, suppliers or competitors, and delivers alerts on a decline in credit score and any court-based judgments over a 12 month period. The Optional Monitoring Service delivers time critical information that suggest potential business instability as it happens, creating time to evaluate risk, make informed business decisions, and allowing you to take whatever action is necessary to benefit your business.
7. How often can I use the Help Desk?
You have unlimited access to the Help Desk for the duration of your policy. Whenever you need expert advice or to report a Notifiable Event, just call the Help Desk as listed in your PG Insurance documentation quoting your policy number.
8. How do I know that the advice I receive is accurate?
The Help Desk is manned by qualified and experienced professionals in their area of expertise- solicitors, accountants, business turnaround, corporate restructuring, insolvency, and tax and employment law specialists.
9. My cash flow is tight, but I’m doing well as a business. What should I do?
This is a sign that you may be overtrading and it is probable that a finance broker could help. Call the Help Desk for practical, action-orientated advice to immediately address the concern before the problem escalates out of control.
10. I would like to consider my financial restructuring options, can you help me?
Call the Help Desk, specialist advisors can answer your questions on all financial restructuring matters. High Street Banks are still the most frequent source of funds although alternative business finance solutions maybe increasingly available elsewhere.
11. Why do I need to take immediate action when faced with a business concern?
By Taking prompt action to confront concerns, issues can usually be resolved to minimise the effects to you and your business. Problems don’t go away, they usually get worse, and remember when you have given a Personal Guarantee, your personal assets could be under threat.
12. What must I do if my business receives a CCJ?
You must notify the Help Desk within 7 Days of becoming aware of any of the following actions against your business:
County Court Judgment (CCJ)
Winding Up Petition
Distrait Order by any creditor
A demand for repayment from a banking creditor whether secured or unsecured