Personal Guarantees: Reaching a Settlement:
3. Intelligence and knowledge
When trying to settle a personal guarantee, there are a number of factors that influence the ease and speed at which a deal is reached.
In the previous 2 articles we looked at those influences resulting from the bank/ organisation perspective and those of the guarantor themselves.
In this 3rd and final article we look at the essence of what can determine the outcome of such negotiations.
Signing a personal guarantee for a business debt is a relatively rare experience for most people and being pursued on one is thankfully even rarer; the biggest issue surrounding both these aspects is the lack of understanding and experience of dealing with such issues on a regular basis.
When signing a guarantee the focus is often on the finance that the guarantee is being provided for and the true consequences of signing a personal guarantee tend to be incidental. This can be financially fatal as such documents can create unrecognised liabilities which can have very long-term dire financial consequences. From signing an onerous indemnity under the guise of a guarantee to unwittingly guaranteeing all future debts of the company, even after one may have left the business, signing a personal guarantee is full of pitfalls for the unwary.
The matter is even worse when it comes to being pursued on one. There are often opportunities to terminate personal guarantees prior to them being called upon but, once monies are demanded, it can be too late for that. Having dealt with over 2,000 personal guarantees in 10 years, working with all the organisations that pursue personal guarantees, provides us with a useful insight and understanding of how each organisation operates when pursuing personal guarantees both with regard to their collection processes and the way they generally setup personal guarantees in the first place.
And no organisation stays the same, they ebb and flow with respect to policies and how they are set up and what applied even just a year ago may be very different from how they operate now. As time moves on, organisations that depend strongly on such documents tend for the most part to improve the documentation, the way they put them in place and how they demand and seek to enforce a personal guarantee; this does not apply to all organisations, many of them seem to struggle to change despite years of issues that frustrate their ability to pursue whilst others are just battle-worn after years of systemic or political and public sensitivity.
BBF Consulting Ltd t/a Personal Guarantees’ key personnel have decades of experience of dealing with such issues coming from previous banking, enforcement and business turnaround experience which can make all the difference in getting a deal done.
28 September By Mel Loades