Personal guarantees on merchant cash advances, what you're signing.

A personal guarantee (PG) is a separate contract sitting alongside the main funding agreement. The business borrows; the PG says that if the business doesn't repay, you personally will. It bridges the limited-liability protection of a Limited company so that the lender has recourse beyond the company's assets.

For sole traders and partnerships, you're already personally liable for business debts as a matter of law so a PG adds nothing material. For Limited companies, the PG is the lender's way of making sure a director can't shield personal assets behind the corporate veil if things go wrong.

Most UK MCA PGs share a similar shape:

• Coverage, usually the full advance amount plus accrued cost of capital and any reasonable recovery costs.
• Signed by directors, a single director if there's only one; all directors (jointly and severally) if there are several.
• Witnessed, usually a deed, requiring an independent witness signature.
• Continuing, the PG covers the original advance plus any top-ups or renewals with the same lender, unless explicitly capped.
• Survives company changes, selling shares or changing director status doesn't automatically release a PG already given.

The document is usually 4 to 8 pages. The key clauses are short and worth reading in full.

A PG isn't called the moment a payment is missed. The two practical triggers are:

• Default on the underlying advance the agreement defines what counts as default. Usually missed daily repayment % for a defined period, or breach of covenant (false information, change of control without consent, etc.).
• Insolvency of the business liquidation, administration, or formal insolvency proceedings. The PG becomes the lender's primary route to recovery once the company can no longer pay.

In practice, lenders usually exhaust other recovery avenues before calling a PG. A short missed-payment episode that gets resolved doesn't typically trigger personal action.

If a PG is called and you can't pay it on demand, the lender's route is the same as any other unsecured creditor pursuing a personal debt:

• Demand letter setting out the amount claimed and a window to respond.
• Negotiation, most cases settle here. Lenders usually prefer a structured repayment over contested litigation.
• County Court action if no resolution. A successful claim becomes a CCJ, which can in turn support enforcement.
• Enforcement, charging order against a property, attachment of earnings, or in serious cases bankruptcy proceedings.

Lenders cannot seize personal assets overnight. They can't bypass the courts. Bankruptcy is the last-resort tool, not the first move. That said, enforcement can be financially and personally serious, which is why the PG decision deserves real consideration.

When more than one director signs, the PG is almost always “joint and several.” That phrase has a specific legal meaning: each director can be pursued for the full amount, not just their “share.”

In a two-director company with a £20,000 PG, the lender can pursue Director A for the full £20,000, ignoring Director B entirely if Director B has no realisable assets. Director A's recourse is then to claim contribution from Director B separately, but that's Director A's problem, not the lender's.

Practical implication: don't assume your co-director's wealth shields you. Sign on the basis that you might be the only one who pays.

Some PGs are limited, capped to a specified £ amount or a percentage of the outstanding debt. A limited PG is materially better than an unlimited one and worth negotiating for, especially on larger advances.

Common caps:

• Fixed cap, e.g. PG limited to £15,000 regardless of advance balance.
• Percentage cap, e.g. PG limited to 50% of the outstanding facility.
• Decreasing cap, exposure reduces as the advance is repaid.

On standard sub-£25k MCA facilities, lenders are usually firm on full PG. On larger advances or renewals, capped PGs become negotiable. We'll raise it on your behalf where it's realistic.

The clauses worth reading carefully:

• The cap, is the PG limited or unlimited? In £ terms or percentage terms?
• The definition of default, exactly what triggers the PG. Look for clauses that allow acceleration on technical breaches, not just missed payments.
• Continuation, does the PG cover future top-ups and renewals automatically, or only this specific advance?
• Waiver of rights of subrogation whether you can reclaim from the company if you pay under the PG. Some lenders waive this; ideally you're not waiving your own rights.
• Notice provisions, how the lender must contact you before calling the PG.
• Spousal acknowledgement, some lenders ask for a non-signing spouse to acknowledge the PG, particularly where matrimonial property might be in scope.

Very few. PGs are near-universal in UK MCA. The exceptions tend to be:

• Larger advances (typically £50k+) with a strong corporate covenant, multi-year filed accounts, clean credit, established trading.
• Renewal facilities with a clean first-MCA repayment history, some lenders will soften PG terms on second and subsequent advances.
• Debenture-secured facilities where the company grants a fixed and floating charge over its assets, that security can replace the PG, though it shifts complexity into corporate-side documentation.

If a no-PG facility is achievable for your situation, we'll flag it. For most owner-managed businesses applying for a first MCA, expect a PG to be required. The honest answer is to plan for it rather than hope to avoid it.