The Federation of Small Businesses (FSB) has raised concerns that widespread demands for personal guarantees are stifling ambition and could severely restrict the economic growth the UK urgently needs.
According to FSB research, 60% of limited company directors say they would be willing to borrow to grow their business—if they weren’t required to risk personal assets like their home or savings. In contrast, only 13% would proceed with borrowing if a personal guarantee was required.
Despite these concerns, the use of personal guarantees is now common practice. Nearly eight in ten (78%) directors who sought business finance were asked to provide one. As a result, 24% chose to walk away from the funding altogether.
Even among those who did agree to a personal guarantee, 14% said it made them run their business more cautiously, prioritising debt repayment over bold growth strategies.
In December 2023, FSB made use of its super-complainant status for the first time to formally raise the issue with regulators. However, the Financial Conduct Authority (FCA) declined to take immediate action. In its response in March 2024, the FCA stated it would only consider evidence for small loans to sole traders and partnerships, leaving limited company directors and their personal guarantees outside the scope of regulation.
FSB is now urging the government to intervene and close the regulatory gap that allows these guarantees to go unchecked. Without reform, the group warns, the personal financial risk involved could deter aspiring entrepreneurs from launching new ventures altogether—at a time when the UK economy needs fresh growth and innovation.
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