As businesses come under increasing financial pressures, many of them will already be considering borrowing in order to ease cash flow and meet fixed costs. There are numerous government schemes available, such as the Coronavirus Business Interruption Loan Scheme, but if a lender can offer finance on its usual commercial terms, it will do so without using the scheme.

Although lenders’ security requirements will vary, here loans are offered to private companies, a lender will typically require a personal guarantee from its directors and/or shareholders (the Guarantor) – so that if the company defaults in making any repayments, the lender is able to recover the sums due from the Guarantor. By entering into a personal guarantee, a Guarantor will place all of their personal assets at risk, and so personal guarantees should never be entered into lightly.

Lenders will also usually require that the Guarantor takes independent legal advice on the implications of entering into a personal guarantee, and that the solicitor providing the advice confirms to the lender, in writing, that it has done so. Ordinarily the advice will need to be given during a face-to- face meeting with the Guarantor, with no other persons present. It remains to be seen whether the lenders will, during the current pandemic, relax the rules requiring meetings in person, but in any event, Thompson Smith and Puxon has in place procedures to ensure that the lenders’ requirements can be met whilst complying with the Government’s recommendations regarding social distancing.

Should you have any queries, or would like to discuss any of your lender’s requirements, please contact Corporate and Commercial Solicitor Claire Powell on 01206 217050 or by email at