Will a director be asked to give a personal guarantee for an invoice finance facility?
Personal guarantees are commonly requested by invoice finance providers, particularly for smaller businesses, early-stage companies, or where the directors have limited trading history. The guarantee is usually limited in scope to cover instances of fraud, misrepresentation, or breach of warranty rather than simply the commercial risk of customer non-payment. Directors should read any personal guarantee carefully and take independent legal advice before signing, as the terms and caps on liability can vary significantly between providers.
What this means for your business
In practice, most UK invoice finance providers will ask at least one director to sign a personal guarantee before completing a facility, especially for smaller or newer businesses without a long trading history. This does not usually mean the director is personally liable for a customer simply failing to pay an invoice, that risk normally sits with the funder or is covered by credit insurance or debtor protection built into the facility.
Instead, the guarantee is typically limited to specific bad behaviour, such as the business submitting fraudulent invoices, misrepresenting its financial position, or breaching the terms of the facility agreement. For an SME director, this means signing a guarantee is a near-certain part of securing funding, but the exposure should be narrower than a full personal guarantee on a bank loan.
The exact wording, scope, and any cap on liability will differ between providers, so directors should never assume one lender's terms apply to another.
Key points
- Personal guarantees are more likely to be requested for smaller businesses, start-ups, or companies with limited trading history.
- Guarantees are typically limited in scope to fraud, misrepresentation, or breach of warranty rather than general non-payment by customers.
- The commercial risk of a customer not paying is usually carried by the provider or covered separately, not by the director personally.
- Liability caps and the exact wording of the guarantee vary significantly between providers, so each agreement must be reviewed individually.
- Directors should take independent legal advice before signing, as the terms can have real personal financial consequences.
Common pitfalls
A common mistake is assuming all personal guarantees work the same way, when the scope and any liability cap can differ sharply between providers. Some directors sign without checking whether the guarantee is limited to fraud and misrepresentation or drafted more broadly, which can expose them to greater risk than expected.
Others skip independent legal advice to speed up funding, only to find unfavourable terms later. It is also worth checking whether the guarantee applies to one director or all directors jointly, and whether it survives if the director later leaves the business.
Related questions
Can a personal guarantee for invoice finance be negotiated?
Yes, the scope and cap on liability are often negotiable, particularly for businesses with a stronger trading history or when using a broker to compare providers. It is worth asking whether the guarantee can be limited further or whether a lower cap can be agreed before signing.
Does a personal guarantee mean a director is liable if a customer becomes insolvent?
Not usually. Provided there is no fraud or misrepresentation involved, customer insolvency is normally treated as a commercial risk borne by the invoice finance provider, not the director personally.
What happens to a personal guarantee if a director resigns from the company?
This depends entirely on the wording of the guarantee agreement, so it should be checked carefully before signing. Some guarantees remain in force for facilities drawn down before resignation, which is another reason to seek independent legal advice.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind Market Invoice. He spent over three years as managing director of Penny, a UK invoice finance business, and his career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library.
Last reviewed: 23 July 2026