Funders will often add as a condition of providing business finance, the requirement for directors to provide personal guarantees. Without the personal guarantee the funding may not even be available.
By signing a personal guarantee, a director places his or her personal estate at risk and if the business fails, the lender can seek to recover its monies from the director personally.
Despite the best intentions of directors, things can sometimes go wrong and often can be outside of their control such as failure of customers or suppliers or macroeconomic factors.
Fortunately, there is now a way to protect against this. Directors can take out personal guarantee insurance that provides protection to a director should a guarantee be called upon.
The key to the policy and indeed the level of premium is the strength of the business for which the personal guarantee is being provided for, and an assessment by the insurance company takes place on the robustness of the business.
This is a new type of insurance but can provide real peace of mind to a director when they decide to sign up to a personal guarantee.
Another advantage is that the insurance is being provided for the benefit of the director who is providing the benefit to the company, and therefore the insurance premiums can be paid for by the company, not the director.
At Snowball we have a relationship with a specialist provider of this insurance and for any of our contacts and clients, we can effect introductions. There is a very simple process to see whether a guarantee can be protected and what the cost would be.