Limited Company and Personal Guarantee

[gregs1959]

Thought I would ask on here…

My daughter and husband buying their first buy to let. It’s going through a Ltd company . As I understand they will be able to claim the mortgage interest as a business expense .

All well and good , looking through the paper work the mortgage is with Aldermore. among the paper work that needs signing there’s a personal guarantee that they will have to sign …

Is this normal ?

Thanks for any replies
Mark

[Doofus]

gregs1959 said:

Thought I would ask on here…

My daughter and husband buying their first buy to let. It’s going through a Ltd company . As I understand they will be able to claim the mortgage interest as a business expense .

All well and good , looking through the paper work the mortgage is with Aldermore. among the paper work that needs signing there’s a personal guarantee that they will have to sign …

Is this normal ?

Thanks for any replies
Mark

It's entirely normal for a lender to require a PG in case the Ltd co goes bust. This will even happen if you start up a small company and want a £5,000 overdraft facility.

[LooneyTunes]

It’s normal for a lender to a small business to ask for a PG but whether they actually get one and will do the business without is a credit/commercial decision.

There’s no downside for a lender to ask for a PG (anything that increases their chance of recovery is a good thing from their perspective, especially if it gives them a call against assets well beyond their exposure) but whether it’s reasonable for them to do so can be more nuanced based on factors.

There’s quite a difference between asking for a PG where it’s a new company, with virtually no equity and a heavy debt burden, vs an entity with less debt/greater collateral (where a lender may try for a PG but ultimately be willing to do without and/or consider other ways to derisk).