Posted on 19th Nov 2015 14:26:50 in Personal Guarantee Insurance
Four ways you might be able to limit your PG exposure
OK, it might be a long shot, especially if you are newly started in business but “if you don’t ask you don’t get”. The lender is in the box seat, because he has the money and your business wants to borrow it. That really was in a way why we created PGI, to help out the guys and girls who had non choice but to give a PG. these tips may help nevertheless.
So here are four things to consider.
1. Can you share the pain and spread the risk. Are you one of a number of directors in the business? Is your bank asking for a £100,000 guarantee? If so and there are say four directors, why not agree but each insist that you will only be responsible for £25,000 each not the joint and several liability of £100,000.
2. Can you limit the time of your exposure. You may be taking out a ten year loan, but try to negotiate that the PG’s expire after 5 years, if you have met all the terms of the loan repayments to that point. Alternatively seek confirmation that once a certain percentage or value of the loan has been paid off the PG’s will lapse.
3. Limit the amount to guarantee. The easiest of the options to negotiate. If the business is borrowing £1,000,000, and the bank is taking security over assets worth £500,000. Then never agree to a PG that is more than the difference between the amount borrowed and the assets. He you might agree to PG’s worth £500,000. Using the two examples above can you limit your personal exposure further?
4. Never put it all on the line. Is it possible for you to exclude certain of your assets from the PG? If you own a matrimonial home, you would never ask your wife to sign a Pg or charge over the property, so could you even get it excluded from the range of assets that the PG could cover?
All this may be impossible to negotiate.
However, you can cut through all the above and simply insure your PG with us in 5 minutes.