- 28 Sep
Invoice Finance Without Personal Guarantees
Invoice finance without a personal guarantee? Having to provide a personal guarantee (PG) to support business borrowing is often a negative for customers. Now there is at least one provider that are prepared to offer invoice finance without a personal guarantee.
Invoice Finance Without A Personal Guarantee
The requirement for Directors to require a PG is pretty much standard within the receivables financing sector, and throughout other forms of business funding. Often customers tell us the reasons for not wanting to sign a personal guarantee include the following:
- I use a limited company so why should I put my personal assets at risk?
- The business should stand on its own feet.
- I don't want to risk anyone coming after my house.
- The company is its own entity, separate from my other assets.
- The business has several co-directors so why should I sign a guarantee?
They are all valid concerns. Of course if you operate your invoice finance facility correctly there should be no need to call on your guarantee, however the terms of the PG normally encompass a wide range of situations that are not just limited to your own wrongdoing.
For example, if a major debtor failed you could be called upon to repay the funding against that debtor. If the rest of your ledger didn't support that repayment, you could technically end up being asked to meet any shortfall. Of course most funders will work with you to find an alternative route to recovering the funds rather than persue a PG, but directors are often concious of entering into such an obligation - no matter how remote the chances that it will be called upon.
In all situations, you will still be required to sign an indemnity against you committing fraud.
Criteria & Switching Providers
The thing that makes this even more interesting is that the cases referred to this provider, where they have not required a PG, have included new startup companies. So it is not just a case of them only offering this type of arrangement to large established organisations that meet certain criteria. This could be a good option if you don't want to provide a guarantee or a potential new funder if you are currently with a factoring company that require personal guarantees.