Businesses Owners Potentially Signing Their Lives Away, As Many Misunderstand Personal Guarantees
Just 8% of enterprise leaders realise how 'inescapable' personal guarantees are and that banks always require them
55% of business owners don’t know what a personal guarantee is, according to new research by Wirefund.
The survey of 510 senior decision makers revealed that many misinterpret the clause, with 21% believing it only means that money should be paid back on time and to the best of one’s ability.
Enterprise owners’ apparent ignorance could have consequences reaching beyond their business, as 61% of respondents don’t realise that personal assets are included as collateral.
Just 8% are aware of how inescapable a personal guarantee is and that high-street banks always require them when offering finance.
Despite the risk involved, business owners appear unfazed with 79% stating they had not been put off a loan because it included a personal guarantee.
Amit Sankey, CEO of Wirefund said:
“Personal guarantees are opaque and outdated tools, misunderstood and misaligned with the needs of British business. Our research shows very clearly that small business owners do not know what they are and are taking on huge, hidden risk as a result.
“We can do small business finance without personal guarantees and we should, because if enforced, they can have devastating effects. I have seen it first-hand. Business finance shouldn’t ruin lives, it should be building lives, businesses and communities. Small businesses are the growth engine of our economy – it’s time finance was properly on their side.”