A personal guarantee is a promise by a person to be answerable for a debt or obligation of another person/entity in the event that person/entity defaults. Seeking personal guarantees from directors is a common way for SMEs to limit their risk in commercial credit arrangements with other SMEs.
When a business hits rocky times the directors of SMEs need to develop a clear business strategy. What is your end game? Business continuity or business exit?
All businesses that provide goods or services on credit should ensure that their credit application process protects their position in the case of non-payment, as much as possible.