Why lenders ask for them
A limited company's liability is limited to its own assets. An SPV may own nothing but the property being financed. A personal guarantee gives the lender recourse to the people behind the company if the property sale does not clear the debt. It also aligns interests: guarantors have a strong reason to see the project through.
Guarantees are standard on company and SPV borrowing, and their presence or absence is one of the terms worth comparing between lenders.
Types of guarantee
- Unlimited: the guarantor is liable for the whole debt, including interest and costs
- Limited or capped: liability is capped at a fixed sum or a percentage of the loan
- Joint and several: where several people guarantee, the lender can pursue any one of them for the full amount
- Cost overrun and completion guarantees: common on development, covering overruns or completing the build rather than the whole debt
- Interest guarantees: covering interest only
What a lender can do under a guarantee
If the company defaults and the security does not cover the debt, the lender can demand payment from the guarantor. If unpaid, it can sue, and could ultimately seek a charge over or the sale of the guarantor's own property, including their home. That is why guarantees deserve as much attention as the loan terms.
Independent legal advice
Many lenders require guarantors to take independent legal advice and a solicitor's certificate confirming it. This is especially important where a spouse or partner who is not involved in the business is asked to guarantee or to consent to a charge over a jointly owned home. Expect this step and its cost in the legal timetable.
Points to check
- Whether the guarantee is capped, and at what figure
- Whether it covers interest, default interest and enforcement costs
- Whether it ends on repayment or continues for other debts
- How liability is shared between several guarantors
- Whether any personal property is charged as well
Some lenders offer lower or no guarantees for experienced borrowers with low leverage. Compare guarantee requirements alongside rate and fees on Instant Quotes, and see what happens if you cannot repay.
Guarantees on development finance
Development lenders often use a combination of guarantees rather than a single full guarantee. A cost overrun guarantee commits the guarantor to fund any costs above the agreed budget. A completion guarantee commits them to finish the build. An interest guarantee covers interest if the facility runs beyond its term. Some lenders take a full debt guarantee, sometimes capped at a percentage of the loan.
These are designed around the main risks in a build, and they can be called even if the scheme is eventually completed and sold. Read each one carefully, check how long it lasts and whether it falls away at practical completion, and consider how it interacts with any guarantees given to mezzanine lenders or equity partners. See mezzanine and equity explained.
Common questions
Do all bridging lenders require personal guarantees?
Most ask for them on company borrowing. Requirements vary, and some lenders accept limited guarantees for experienced, lower-leverage borrowers.
Can my home be at risk under a personal guarantee?
Yes. If the guarantee is called and not paid, the lender can pursue your personal assets, which could include your home.
What does joint and several mean?
Each guarantor can be held liable for the full amount, not just their share.
This guide is for general information only and should not be treated as legal, tax or financial advice. Lender requirements depend on the property and your circumstances.
