Protecting Personal Guarantees

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If you have negotiated lending from a bank, the chances are you may have had to provide a personal guarantee (normally secured against your house).

There are a number of matters to consider if you have placed your family at financial risk by agreeing to a personal guarantee.

The first is that you may not have needed to involve the bank or incurred additional lending at all as with Total Planning you may have been able to raise the capital yourself.

The second point is that if you are stuck with a personal guarantee, then you need to take action to protect your family by ensuring that you take a first or second charge on your company assets.

Let us say that your company borrowed £300,000 from the bank by way of a personal guarantee secured against your prime residence.

Your company becomes insolvent and the company assets bring in £450,000 but the creditors total £1.2 M. The bank will be paid 33p in the £ (together with other creditors) and claim the balance (£200,000) from you.

Your action in placing a charge upon the assets will mean that you are able to pay the bank off in full, so there is no claim against your assets.

Do not rush into signing Personal Guarantees ensure you take proper advice.

Contact one of our Financial Planning Consultants, at Pareto Lawrence we offer Total Planning advice for both corporate and private clients.

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