What is a personal guarantee?
A personal guarantee is a legal promise to repay the credit we issue to your business. Signing a personal guarantee means that if your business should ever become unable to repay the debt, you agree to assume personal responsibility for the outstanding balance.
Why do I need to sign a personal guarantee?
Personal guarantees only apply to representatives of limited companies who apply for a Holvi credit card on behalf of their company. Holvi asks such owners or executives to sign a personal guarantee in order to validate their credit contract and receive a credit card.
From the business owner’s side, it looks like this. You will:
- Apply for a credit card
- Receive an offer
- Accept the offer – or reject the offer and abandon this process
- Sign your credit card contract
- Sign your personal guarantee and receive a virtual credit card instantly
- Order your physical credit card
More information about personal guarantees
Personal guarantees are used to grant your limited company a Holvi Business Credit Card and accompanying line of credit. They also provide Holvi with an extra level of protection to make sure the credit we lend to your limited company is safely repaid.
In plain terms, when we lend money to a sole trader, it’s the sole trader who is personally responsible for repaying the debt. That’s because there is no legal distinction between the sole trader and their business. However, limited companies and their owners or executives are legally distinct – in fact, that’s a main benefit of forming an ltd.
In the unlikely event that a limited company becomes insolvent, Holvi will be left out of pocket for the funds we’ve leant. This is where a personal guarantee comes in. A personal guarantee forms a legal agreement to transfer responsibility for the outstanding debt from the insolvent company to one of the company’s representatives – in our case, whoever signs the contract and guarantee, and orders the credit card. This is an essential step in securing a credit card for your business.