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Personal Guarantees: The Hidden Clause That Ruins Investors
Most commercial lenders require a personal guarantee (PG) from directors of SPV borrowers. This means your personal assets — not just the company — are at risk if the project fails. Few investors read this until it's too late.
Borrowing through a limited company offers liability protection in most circumstances, but a PG pierces that veil entirely. A lender can pursue your personal home, savings, and other assets under a PG. Good brokers negotiate PG caps (e.g. capped at deposit amount), unlimited versus limited PGs, and whether a PG can be released upon practical completion. Never sign a commercial facility without a solicitor reviewing the PG clause.