Personal Guarantee Called In: 30-Day Rescue Runbook
A formal demand under a personal guarantee gives a director typically 14 to 30 days to pay before the lender moves to enforcement. This guide covers what UK lenders can and cannot do, the FOS escalation route where it applies, and the practical options between full payment and personal insolvency. Written for directors who have just received a demand letter.
Director, BestBusinessLoans
Oliver leads BestBusinessLoans's editorial reviews and methodology. With a background in UK commercial finance, he oversees lender research, rate verification and review independence.
Last reviewed: 7 May 2026
What a PG demand letter actually says
The lender writes citing the underlying loan default, the guarantee clause being relied on, the demanded amount (usually principal plus default interest plus fees and enforcement costs), and a payment deadline (typically 14 to 30 days). The letter usually warns of escalation: court proceedings, a charging order against personal property, bankruptcy petition, or instruction of a debt-collection agency. Read it carefully. The numbers should reconcile to the underlying loan and the guarantee wording. Errors are common, particularly on default-interest calculation and enforcement costs.
What UK commercial lenders can do
Commercial lending to a Ltd company sits outside the Consumer Credit Act 1974 in most cases. The lender can: issue a statutory demand for the personal debt over £5,000, present a bankruptcy petition once the demand period expires, register a charge against personally-owned property if there is one in the guarantee or by court order, instruct enforcement agents under a county-court judgment. The lender cannot: take property without a court order, harass the director (Protection from Harassment Act 1997 still applies), pursue family members who did not sign the guarantee. Where the guarantee was granted alongside a regulated consumer-credit agreement (rare in commercial SME lending), FCA rules and the Consumer Credit Act apply with stronger borrower protections.
Limited PGs and which BBL-reviewed lenders use them as standard
A limited personal guarantee caps the director's exposure at a stated figure regardless of the loan size. Among lenders reviewed on BestBusinessLoans, the published positions are: Funding Circle and iwoca operate joint-and-several PGs at up to 100% of the loan as standard but will negotiate limits on commercially sensible deals at term-sheet stage. 365 Business Finance offers no-PG MCA in some applicant cases. Capify operates PGs as standard on term loans, MCA structure reduces practical PG exposure because repayment is from card flow. Allica Bank and OakNorth structure asset-backed deals where the asset replaces the PG in some cases. Aldermore and Shawbrook follow similar logic on asset-backed lines. The negotiation is at term-sheet stage, not at demand stage.
Joint and several vs several only
Multi-director PGs default to joint and several: each director can be pursued for the full amount and the lender chooses who to chase. A several-only PG splits liability, each director is liable only for their stated share. Joint and several is the lender preference because it concentrates collection. The director who gets chased can pursue contribution from co-guarantors under the Civil Liability (Contribution) Act 1978, but contribution rights are useless if a co-guarantor is insolvent or has left the jurisdiction. Check which structure your guarantee uses; the demand letter often does not say.
FOS and the Lending Standards Board route
The Financial Ombudsman Service can consider complaints from a "small business consumer" if the underlying business is below the FOS thresholds (turnover under £6.5m and either fewer than 50 employees or balance sheet under £5m). Where the complaint qualifies, FOS can review the conduct of the lender, the fairness of the demand, and the calculation. Outside FOS jurisdiction, the Lending Standards Board operates a voluntary code that participating lenders sign up to, covering professional conduct in commercial lending. Either route is slower than the demand timeline, so they sit alongside, not instead of, paying or refinancing.
The four practical options
Option one: pay the demanded amount in full from personal liquidity. Stops enforcement immediately. Negotiate a release of the guarantee in writing as part of payment, otherwise the guarantee can resurface against any further drawn balance. Option two: refinance the underlying corporate debt so the lender is repaid and the guarantee falls away. Mainstream lenders rarely engage when an active demand is on the table; specialist post-decline lenders (Bizcap, JPM Capital, Bolton Finance) and asset-backed routes (Acorn Commercial Finance, Shawbrook Bank) can engage if the underlying business remains viable. Option three: negotiate a discounted full-and-final settlement with the lender. Lenders often accept 40 to 70 pence in the pound rather than pursue bankruptcy, particularly where the director has limited personal assets. Get any settlement in writing on full-and-final terms before paying. Option four: if the underlying business is insolvent, speak to a licensed insolvency practitioner immediately. An IVA (Individual Voluntary Arrangement) for the director or company-side restructuring may be the appropriate path. Continuing to trade an insolvent business after a PG demand can extend personal liability further.
FAQ
How long do I have between a PG demand and bankruptcy?
The demand letter typically gives 14 to 30 days to pay. After that, the lender can issue a statutory demand under section 268 of the Insolvency Act 1986. The statutory demand gives 21 days to pay or apply to set it aside. Only after both windows can a bankruptcy petition be presented. So the practical window from first demand to court hearing is around 60 to 90 days, but enforcement preparation runs in parallel.
Can my home be taken under a PG?
Not directly without a charging order or a charge already registered against the property. The lender first needs to obtain a county-court judgment, then apply for a charging order against personally-owned property, then apply to enforce by sale. The process takes months. A PG that explicitly creates a charge over the family home (rare but worth checking) is faster. Family homes held as joint tenants with a non-guarantor spouse have additional protections and are more difficult to enforce against.
Will paying the PG remove it from my credit file?
Paying clears the debt but the PG default may already have been registered as a default on your personal credit file. The default stays on the file for 6 years from the date registered. Pay-off marks the default as satisfied, which is a softer position for future lenders but is not a deletion. A negotiated settlement (full-and-final less than 100p) can be marked as "partially settled" or "settled" depending on the wording you agree.
Can I get insurance against a PG demand?
PG insurance products exist that pay the lender if you default on the guarantee, in exchange for a premium of 1% to 4% of the PG amount per year. Useful for high-value PGs but expensive and most policies exclude voluntary winding-up of the underlying company and major underwriting events. PG insurance is bought before the demand, not in response to one.
Does FOS apply to my PG?
Possibly. FOS jurisdiction over commercial lending depends on the size of the business at the time the credit was taken, not at the time of complaint. If the business was a small business consumer (turnover under £6.5m, fewer than 50 employees or balance sheet under £5m) at the time, FOS can consider complaints about lender conduct, calculation errors, and the fairness of the demand. Outside that window, the route is the courts.
Should I speak to an insolvency practitioner before paying?
Yes if the demand exceeds your liquid personal assets, if you have other significant personal debts, or if the underlying business is in difficulty. An IP can model whether full payment, a settlement, an IVA or bankruptcy gives the best personal financial outcome. Most IPs offer a free initial consultation. Once a demand is on the table, the cost of getting the strategy wrong can outweigh the IP fee by orders of magnitude.
Can I be released from a PG by resigning as director?
No. Resignation does not release a personal guarantee. Some PGs include a "release on resignation" clause but most do not. The PG continues until the underlying debt is repaid or the lender formally releases the guarantee in writing. Always read the release wording before resigning if a PG is in play.
What if I never signed the PG but the lender claims I did?
Demand a copy of the executed PG document. UK PGs require the guarantor's signature, witnessed in most lender templates. Forged or invalid signatures defeat the demand, but the burden is on you to challenge it formally and ideally with a solicitor. Spousal-undue-influence cases (where a guarantee was signed by a non-director spouse under pressure) can also defeat enforcement, the bar is high but the case law (Royal Bank of Scotland v Etridge) is settled.
Reviewed by Oliver Mackman, Director. Last reviewed: 2026-05-07.