Personal Guarantee Insurance

Our PGI Insurance Service:

• Insurance for up to 80% of your business finance
• Up to £550k cover
• Up to £1m cover for landlords looking for BTL PGI insurance
• Unsecured and secured loan protection
• PGI for business loans, asset finance, invoice finance, MCA and more
• Professional and friendly advisory service to match you with the right cover for your needs

Many business loans will require a director’s guarantee to be set up for the loan’s repayment should your business fold. With the personal risk of a debt that could mean losing your home or worse, the pressure to be successful is huge.

Personal Guarantee Insurance (PGI) is a product designed to lift some of that pressure, providing a substantial pay out should the worst happen.

Want to speak to a specialist and compare your options? Book a consultation below. 

Book Consultation »

What Is Personal Guarantee Insurance (PGI)?

Business loans are, themselves, a business. The lender is giving your company access to new capital that you will pay back over time, and in return they charge interest to generate profit for themselves. While to a newcomer, it can seem a complicated world, in truth it is as simple as that.

For the lender then, the key factor is risk.

They give your business a substantial amount of money in the belief that over time it will be repaid, and that is a risk.

Even if your business is well-established and in a proven sector, anything can happen and - over the years - almost everything has. Businesses fail and fall into liquidation and for the lender that can be a disaster, with debts defaulted and payments unpaid.

It is for this reason that many business loans, especially those that are unsecured and those for more risky ventures, are backed with a director’s guarantee - a personal guarantee that moves some of the risk away from the lender and onto the business owners.

‘If the business fails,’ the personal guarantee says, ‘then I will repay the loan from my personal assets.’ It’s a show of faith in your own business idea and is enough for many lenders to approve the loan, but should your business fail, where does that leave you? Without a job and with your personal assets in line to be seized.

PGI - The Chain of Risk

No one is going to take all the risk from you. It is your business which, if successful, will benefit you the most. You are the one who should be taking the greatest risk.

But the lender is willing to accept some risk. That’s their business - to risk their money in the aim of making profit, but they work hard to assess that risk. When they ask you for a personal guarantee, it’s because they want to offset the majority of that risk.

An insurer will also only accept some of the risk.

They take on that risk in return for profit. They become another important link in the chain of risk, sharing the responsibility for dealing with the problem if it all goes wrong, and in return they take payments from you in the form of annual premiums.

When you take out personal guarantee insurance, you lower your personal risk in exchange for some of the profits.

Book Consultation »

How Does PGI Pay Out?

PGI is designed to be as simple and efficient as possible, stepping in when your personal guarantee may be called upon to save you from having to liquidate your own assets (such as selling your house) to pay the outstanding business debt.

Here are the 4 steps to how PGI works:

The first step - help and advice

• It’s important to contact your PGI provider as soon as your business is at risk. This is because the advisors at your insurer may well be able to help you overcome whatever problems are occurring, perhaps saving the business before it collapses. Not only can this early intervention make a huge difference to the outcome, but it also helps reassure you that the insurer is there for you and should the worst happen, they are able to act quickly.

The second step - if the personal guarantee is called upon

• If the business cannot be saved, your PGI insurer is there to help as soon as the lender calls on your personal guarantee. Just contact them immediately.

The third step - negotiation on your behalf

• The insurance includes cover for a negotiator to act on your behalf, discussing the loan with the lender and doing what they can to obtain a settlement figure that’s as low as possible. This is a benefit to both the insurer and yourself, as the final repayments will be as small as can be agreed.

The fourth step - payment is made

• With the negotiations complete, the only remaining step is to pay the lender the agreed sum. The insurance will pay the greatest portion of this - depending on your insurance contract this will be as much as 80% of the total. You will then be left with the far smaller portion of the debt to repay, typically 20% of the final settlement figure.

What Types of Business Loan is PGI For?

Personal guarantee insurance exists for a wide range of business loans where a director’s personal guarantee is issues. This includes both secured and unsecured loans as well as many line-of-credit agreements.

Secured Loans

• Asset-based finance
• Commercial mortgages
• Invoice finance loans

Unsecured Loans

• Start-up loans
• Peer-to-peer loans
• Business expansion loans
• Short-term working capital loans
• Bridging loans

Lines of Credit

• Credit cards
• Overdrafts
• Invoice finance lines of credit
• Merchant cash advance 

How Much Can Personal Guarantee Insurance Cover?

Personal guarantee insurance is available for amounts up to £550,000, and the cover increases as the risk is lessened. Unsecured loan PGI in its first year, for example, would typically cover 60% of the final settlement figure, rising to 70% in the second year, and 80% in the third (and beyond).

Secured loans, where the collateral assets mitigate a large portion of the loan value, are covered to 80% from the outset.

What about Personal Guarantee Insurance for Landlords?

For landlords, you can get cover for up to £1m for your buy to let property(s). 

Book Consultation » 

Is Personal Guarantee Insurance Worth Having?

At Clifton Private Finance, we advise business leaders from a wide range of sectors in their financial and credit affairs and are strong advocates of personal guarantee insurance.

The director’s personal guarantee is one of the more worrying parts of taking out finance for a great many business directors as the risk involved should the business fail is significant.

Personal guarantee insurance greatly reduces the strain running a business can have on relationships and home life, allowing you to keep that essential separation between work and family. It is another tool in the business owner’s arsenal, which enables them to push boundaries and take opportunities that may otherwise seem out of reach.

While PGI does not reduce risk to zero (and nor should it), it does make the situation a lot more manageable.

Not only has that, but the level of support and expertise offered by insurers often saved businesses that would otherwise fall into administration.

Book Consultation »

Obtaining PGI with Clifton Private Finance

One of the responsibilities of your business financial broker is to make you aware of your options. At Clifton Private Finance, we can offer you advice on the finest level of personal guarantee insurance alongside any of the loan options that may ask for a personal guarantee.

Need help securing personal guarantee insurance? Book a free, no-obligation initial call below, and we can walk you through the process.

Call us today to discuss your requirements on 0203 900 4322 or book in time to speak that suits you. We can provide advice over the phone or face to face in our Bristol and Cardiff offices.

PGI FAQs

What types of loans typically require a personal guarantee in the UK?

In the UK, personal guarantees are often required for unsecured business loans, such as start-up loans, business expansion loans, and short-term working capital loans. Secured loans like asset-based finance and commercial mortgages may also require a guarantee.

How much could I potentially be liable for under a personal guarantee?

You could be liable for the full outstanding amount of the business loan or credit if the business defaults and your personal assets are pursued. This could be hundreds of thousands of pounds depending on the size of the loan.

Does PGI cover all types of personal assets?

PGI policies typically cover personal assets like your home, investments, savings, and pensions. Some policies may exclude certain assets, so check with your provider.

Will PGI help if my business is already in financial difficulty?

PGI providers can offer advice and support if your business hits difficulties, potentially helping save it. However, policies must be in place before problems arise to get cover.

How long does PGI cover me for?

Policies usually provide cover for the full term of the business loan or credit facility that requires your guarantee. This may be 1-5 years or longer.

Can I get PGI if I have a poor credit history?

You can still potentially get PGI with past credit issues, but insurers will factor your financial history into policy terms. Premiums may be higher with defaults or CCJs.

Does PGI cover company director pensions?

Many policies do include cover for company pensions that directors have invested their personal funds into. But check if any pension types are excluded.

What happens if my insurer goes bust - am I still covered?

Reputable PGI providers are covered by the FSCS compensation scheme up to £85,000 per person, so you would still receive valid claim pay outs.