Will a director be asked to give a personal guarantee for an invoice finance facility?
You may be. UK Finance, the banking trade body, says lenders may ask for a personal guarantee, and that this can be common where the business is a limited company. It also says a guarantee can be unlimited, covering everything the business owes the lender plus interest and costs, or limited to a set amount. Some invoice finance lenders ask for something narrower: FlexABL, for example, says it will "normally ask for some form of limited personal guarantee or warranty from the directors". So there is no single answer: the wording you are given decides what you could owe. Read it, and take independent legal advice before you sign, as UK Finance strongly recommends.
What this means for your business
Expect the question to come up, and leave time for legal advice before the facility starts. What you could owe depends on the kind of guarantee in front of you. UK Finance's guide to personal guarantees (2025, read 3 November 2026) describes the main kinds:
- Unlimited. The guarantor is liable for the whole of the business's debts to the lender, plus interest, costs and expenses.
- Limited. Liability is capped at a set sum, though costs and expenses may be added on top of the cap.
- "All monies". The guarantee covers all present and future debts the business owes the lender, not just the debt when you signed.
Some invoice finance lenders ask for a warranty or a guarantee limited to the business's promises about its invoices, such as that the work was done and the invoice is genuine. That kind only comes into play if one of those promises turns out to be untrue. Lenders word these differently, so never assume one lender's terms apply to another. Ask which kind the lender wants, whether it is capped, and how it ends.
Key points
- A guarantee can be unlimited or capped at a set sum (UK Finance). The wording decides which.
- On a recourse facility your company has to repay advances against invoices customers do not pay. If the company cannot, an unlimited guarantee can make the director liable for that shortfall.
- A guarantee does not usually end when a director resigns or leaves (UK Finance). Check whether yours can be ended by notice.
- If more than one director signs "jointly and severally", the lender can claim the full amount from any one of them (UK Finance).
- UK Finance strongly recommends independent legal advice before you sign.
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?
You can ask. UK Finance says each lender has its own preferred form of guarantee, so ask before you sign whether it can be capped at a fixed sum, limited to the promises the business makes about its invoices, or released after a set time. Whether the lender agrees is up to the lender.
Does a personal guarantee mean a director is liable if a customer becomes insolvent?
It depends on the guarantee. On a recourse facility your company has to repay the money advanced against an invoice the customer does not pay. If the company cannot, an unlimited guarantee can reach that shortfall: UK Finance says an unlimited guarantee covers the whole of the business's debts to the lender, plus interest and costs.
A guarantee limited to warranties only comes into play if the business breaks the promises it made about its invoices. Ask which kind you are being asked to sign.
What happens to a personal guarantee if a director resigns from the company?
UK Finance says guarantees generally stay in force when a director resigns or leaves the business, unless the guarantee says otherwise. Some guarantees let the guarantor give notice to end it, which limits liability from a set date. Check the wording, and act quickly if you want to end it.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam was managing director of Penny, a UK invoice finance business, from July 2020 to November 2023. His career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library. Career record.
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