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Do you want to access invoice discounting but don’t want to provide a personal guarantee?

Invoice finance without a personal guarantee is available. You can contact Funding Solutions on 0845 251 4040

Many invoice finance providers insist upon a personal guarantee and others only insist upon a guarantee if you are factoring. This seems strange to me as the lendersĀ risk associated with invoice discounting is higher than it is with factoring. However, the criteria for invoice discounting with these lenders if far more stringent so the personal guarantee is less important.

Why do lenders look for a personal guarantee?

A typical requirement for a personal guarantee will be between 10-25% of the overall funding line while some lenders will look for unlimited personal guarantees in the first instance.

The reason lenders look for a personal guarantee is to keep the directors interested in a failed situation. If a guarantor stands to lose money under a guarantee they will help the lender collect in outstanding debts. It may mean they need to dig out a proof of delivery or a signed timesheet to help resolve a dispute.

Are personal guarantees called upon?

Rarely are personal guarantees called upon. Invoice finance lenders are lending against outstanding invoices and their calculation of prepayment relates to what they feel they will be able to collect out in a failed situation. On that basis the outstanding debt is repaid by collecting out what is owed by customers. This can be a troublesome process so the directors or guarantors help is often vital and as already stressed the guarantee is there to keep them interested in assisting.

In fairness banks and other lenders are becoming far less reliant on personal guarantees than they used to. Mostly due to reputational risk, especially where the family home is the main asset underpinning a guarantee.

So do I have to provide a guarantee?

In short no. There are lenders available who will provide funding without a personal guarantee.

Shop around or use a reputable broker such as Funding Solutions.

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