When it comes to Personal Guarantee demands relating to a business that borrowed money through a British Business Bank government backed scheme such as CBILS (Coronavirus Business Interruption Loan Scheme) or RLS (Recovery Loan Scheme), whether arranged by a lender or a broker, there is a duty placed on the lender as to how the product is presented.
The facility might be provided by a high street bank, such as Lloyds, Barclays, NatWest or HSBC, or by a lending platform, such as Funding Circle or Assetz Capital, but the core principle remains the same: if an individual can be held personally liable for a company’s debt in the event of default, then the product needed to have been presented in clear and transparent terms.
The British Business Bank requires the lender to adhere to strict procedural conditions, particularly when it comes to the potential for a personal guarantee. This not only applies to the documentation provided, but also to responses given during the application process to any questions a potential personal guarantor might ask.
BROKER ARRANGED LENDING
If lending is introduced by a broker, the lender’s general position is that the broker is independent and not their agent.
However, when it comes to schemes such as CBILS or RLS, a lender may be responsible for any of the broker’s acts or omissions when presenting and arranging the product – if the actual presentation of the product or the document journey was insufficiently clear, it may undermine the lender’s ability to rely on the guarantee.
A signed personal guarantee is always a serious matter and the surrounding journey is crucial to its enforceability: what was requested, what was said, what was disclosed, what was signed and whether any scheme-specific documents were missing all may have a bearing.
Before accepting an alleged personal guarantee liability, you are entitled to a transparent and fair process when consenting to personal liability for a commercial facility. With regard to CBILS and RLS funding, there are governing rules and due process and the lender has a duty to present and administer the product in accordance with those terms.
If you are being personally pursued with respect to a loan provided to a limited company under a British Business Bank / government-backed scheme and have any concerns, then please contact us HERE
