Discussing a personal guarantee

When to have this conversation

Guarantees come up when a client extends meaningful credit to a company whose own assets may not cover the debt — a newer business, a thinly capitalised entity, or a large order that would hurt if it went unpaid. They are also relevant when a client has been burned by a company that simply folded, leaving nothing to recover.

Raise the topic before the credit is extended, not after. A guarantee secured up front is straightforward; trying to obtain one once a debt is already overdue is far harder and often impossible.

How to open it

Explain the concept simply and tie it to a risk the client already feels. Many owners do not realise that a company debt can evaporate if the company does.

• 'If you're selling to a company on credit and it goes under, you may get nothing. A personal guarantee means a director stands behind the debt personally.'
• 'For your bigger or newer customers, a guarantee is the difference between a debt you can pursue and one that vanishes with the company.'
• 'It's a common request for substantial credit — not an insult, just prudent.'

What to say (talking points)

Give the client the practical contours: when to ask, how to ask, and what it changes. Be clear that the document itself needs proper drafting.

• 'Reserve guarantees for higher-risk or higher-value accounts — you don't need one from every customer.'
• 'Ask for it as routine policy on large credit: "For orders above this size we ask a director to guarantee the account." Policy is easier to ask than a personal favour.'
• 'A guarantee widens who can be pursued if the company can't pay, which materially improves recovery odds.'
• 'Have it drafted by a lawyer so it's actually enforceable — a vague guarantee can be worthless.'

Handling pushback

Clients fear that asking will offend a customer, and they sometimes overestimate what a guarantee guarantees. Address both.

• To 'it'll offend them': 'Framed as standard policy for large accounts, it rarely offends. A director confident in their business usually has no problem signing.'
• To over-reliance: 'A guarantee improves your odds, but a director with no assets still can't pay. It's a strong tool, not a magic one — pair it with sensible credit limits.'

Turning it into action

The action is to set a policy and get the paperwork right. Help the client define a credit threshold above which a guarantee is requested, and route the drafting to a qualified professional so the document holds up.

Where a guaranteed debt later goes unpaid, recovery can pursue both the company and the guarantor, which a commission-only partner can assess at no up-front cost via a free debt appraisal. Encourage the client to read the library material on guarantees, then confirm the policy is in place for new large accounts.