Charge structures and security
Personal guarantee
Personal contractual undertaking by a company director to pay a corporate debt if the company defaults. Standard on UK commercial mortgages to limited-company borrowers.
Personal guarantee is a written contractual undertaking by a director, shareholder or other principal of a borrowing company that they will personally pay the company’s debt to a lender if the company itself fails to. On UK commercial mortgages to limited-company borrowers, a personal guarantee is the norm rather than the exception.
How PGs are typically structured
Three dimensions vary across lenders:
- Amount: capped (a fixed sum, often 20 to 30% of the loan) or unlimited (the full amount of the loan plus interest and costs). Capped PGs are now standard at most UK commercial mortgage lenders.
- Covenant: full recourse to the guarantor’s personal assets (very rare) or limited to specified assets (more common, often only the guarantor’s personal residence or a specified investment portfolio is excluded).
- Form: standalone PG deed or a guarantee-and-indemnity. The indemnity element gives the lender slightly stronger contractual rights and is common on specialist lender paper.
When a PG is required
Almost always on UK commercial mortgages to limited-company borrowers, with these typical exceptions:
- Investment loans below 60 to 65% LTV at some specialist lenders, where the property security alone is judged sufficient (functionally non-recourse).
- Pension-trustee borrowers (SIPP, SSAS), where the trustee structure does not permit personal guarantees from beneficiaries.
- Large institutional borrowers where the corporate covenant alone is investment-grade.
A worked broker example
A Birmingham purchase by a newly-incorporated SPV. Loan 1.2 million, two directors. The lender requires a joint and several PG capped at 20% (240,000). If the SPV defaults and the property sale leaves a 180,000 shortfall, each director is jointly and severally liable for that 180,000, recoverable up to the 240,000 cap.
The capped PG is materially better for the directors than an uncapped PG would be. Brokers should negotiate cap and carve-outs hard.
PGs versus non-recourse
A loan with a PG is not non-recourse. Non-recourse means the lender’s only remedy is the property security itself. As soon as a PG sits behind the loan, the lender can pursue the guarantor personally for any shortfall up to the cap. See non-recourse for the contrast.