Personal guarantees in B2B credit Part 2: how to document a personal guarantee

Part one explained when personal guarantees (PGs) make commercial sense and how to deploy them without scaring off good customers. Part two gives you a drafting checklist so your guarantee actually bites when needed.

A guarantee that is badly drafted or wrongly executed can fail at the moment of truth. Use this checklist to get the essentials right.

1) Use a deed of guarantee and indemnity

While a simple contract can work, a deed avoids consideration arguments and signals seriousness. Title it “Deed of Guarantee and Indemnity” and state it is executed as a deed. Include:

• Primary guarantee: “Guarantor irrevocably and unconditionally guarantees the due and punctual payment…”
• Indemnity: a separate promise to indemnify for all losses, independent of the underlying contract—very helpful if the main contract is void/varied.
• Continuing security: covers present and future obligations up to the agreed cap.

If there’s any suggestion of dispute on the underlying debt, keep your disputed invoices flowchart close and evidence each step.

2) Identify parties and the underlying agreement precisely

• Full legal name, company number and registered office of the supplier
• Customer company details and the credit agreement/terms being supported
• Each guarantor’s full name, home address and date of birth (for ID checks and tracing if needed)

Precise identification reduces “wrong entity” and “I never signed that” defences. It also shortens any later debt recovery process steps.

3) Cap, scope and triggers

• Cap: state a monetary cap “plus interest, costs and VAT” and whether it floats with credit limit increases (prefer fixed cap unless re-executed).
• Scope: balances on trade account, interest, fees, and reasonable recovery costs; include set-off waiver.
• Triggers: non-payment on due date; insolvency events; exceeding credit limit; misrepresentation.

Pair these with operational guardrails and five strategies to boost collection success so you use the guarantee proportionately.

4) Joint and several liability

If more than one guarantor signs, specify joint and several liability so you can pursue either or both. Allow release of one guarantor without releasing the other(s).

5) Variations, assignments and continuing liability

Include clauses that guarantee remains effective despite: variations to the trading terms, time extensions, composition with the customer, partial payments, changes to your structure or assignment of the debt. This prevents technical defences later.

6) Execution formalities

For an individual guarantor, the deed should be signed and witnessed (witness over 18, independent, present at signing, full details recorded). For a corporate guarantor, comply with Companies Act execution methods (two authorised signatories or a director in front of a witness). Keep certified ID—useful if you ever need tracing and a brand-sensitive agency steps in.

7) Independent legal advice and fairness

Offer the guarantor the opportunity to seek independent legal advice, especially if they are not a director or there is any risk of undue influence. Clear explanations reduce the chance of later challenges and align with ethical collection principles.

8) Notices, jurisdiction and service

Set out how formal notices are served (email plus post), the governing law and courts (usually England and Wales), and a continuing address for service. Add an obligation to keep contact details up to date—vital for smooth, successful collection calls.

9) Data protection

Tell guarantors how you’ll use their personal data (credit checks, tracing, sharing with collections partners). Keep retention periods tight and access controlled; good governance smooths later escalation decisions.

10) Attach the trading terms and clarify interest

Attach or incorporate your trading terms so there’s no doubt about the debt they support. If your terms are silent on late-payment interest, understand the statutory backstop, even if your primary leverage is the PG: start with late payment remedies and escalate as needed.