One of the benefits of running a business as a Limited Company is the reassurance of ‘limited liability’. This means no personal liability for any financial losses made by the business. In this way, choosing to run as a Limited Company could therefore be considered as ‘protection’, should things go wrong.
However, one element of standard practice within a Limited Company negates this assumption...Personal Guarantees.
It is standard practice for lenders (and indeed some suppliers) to request Personal Guarantees from Directors to act as security for company borrowings. By doing this, the creditor will have recourse to the Director personally in the event the company fails to meet the legal conditions of the loan.
(These Personal Guarantees are not seen as necessary in the case of a sole trader or partnership, given that they are personally liable for company debt as the business owners.)
This is therefore something that should not be ignored when it comes to protection for Limited Companies.
How can you be reassured?
Directors need to understand the implications that a guarantee could have on both the business and themselves. This is where Business Loan Protection comes in to assist in protecting the financial stability of your company in times of uncertainty, by paying out a lump sum to cover the business loan or other credit facilities.
Additionally, there’s the option to increase the amount of cover in line with an increasing loan; providing further peace of mind that you’ll have the funds in the right place at the right time.
Why have your own assets potentially exposed when there are facilities to transfer this risk, protecting both the company and yourself personally? If this is an area you would like to discuss further then please do not hesitate to get in touch with your usual Towergate Insurance Brokers adviser or email TIB@towergate.co.uk.