Personal Guarantees and Invoice Finance
When exploring invoice finance options, it’s crucial to grasp the role personal guarantees play in the process. Unlike some other financing avenues such as loans or overdrafts, invoice financiers may require a personal guarantee, albeit for only a portion—typically around 20%—of your funding limit.
What sets invoice finance apart is the reduced exposure for business owners compared to traditional loans or overdrafts. In those cases, personal guarantees often encompass the entire amount owed, leaving the guarantor liable for the full sum in the event of default.
Invoice financiers operate differently. They seek a smaller portion of the funding limit under a personal guarantee, usually around 20%. This serves as a commitment from the business owner, without exposing personal assets to the same extent as traditional lending arrangements.
Moreover, in the unfortunate event of insolvency, personal guarantees with invoice financiers are less likely to be invoked. This is because outstanding balances are typically settled through customer repayments, alleviating the need for recourse to personal guarantees.
At Optimum Finance (www.optimumfinance.co.uk), we recognise the importance of safeguarding personal assets while unlocking the potential of invoice finance for your business. Contact us today to discover how our tailored solutions can support your growth objectives without unnecessary risk
