Following the widespread criticism of the requirement for directors to give their personal guarantees to secure lending under the Coronavirus Business Interruption Loan Scheme (CBILS), the government has announced that personal guarantees can now only be demanded for the 20% of the CBILS loan over £250,000 not supported by the government scheme, and no personal guarantee may be taken for a commercial loan below £250,000.
Directors should still take legal advice before signing a personal guarantee for loans above £250,000, as it will be crucial to fully review and understand the extent of the liability under the guarantee and ensure it clearly limits the sums payable in the event the company cannot meet its liability under the funding agreement.
In other developments, the CBILS scheme will be extended to all viable small businesses affected by COVID-19, not just those unable to secure normal commercial loans. This follows reports that borrowers were being told by their banks to take on high-interest debt instead.
If your lender requires you to take independent legal advice before or at the time you sign the personal guarantee, we are able to arrange ‘virtual’ meetings with you, by Microsoft Teams or Skype, to fulfil your funders requirements.
For more information or to arrange an appointment with our commercial solicitors please call us on 0161 696 6229 or complete our online enquiry form and a member of the team will contact you directly.