Do unsecured construction business loans require a personal guarantee?

Short answer: sometimes. Lenders commonly ask for a personal guarantee (PG) where a construction company is young, asset‑light or has uneven cashflow. However, strong accounts, contract-backed work, alternative security (asset finance or invoice finance) or specialist lenders can often reduce or remove that requirement. To discover what you’re likely to be asked for, get a free eligibility check now — Get Quote Now. Submitting an enquiry is quick, free and won’t affect your credit score.

Quick answer — will an unsecured construction loan usually require a personal guarantee?

Most lenders take a cautious view when lending to construction businesses because of project‑based income, retentions, and subcontracting risk. For unsecured loans, a personal guarantee is frequently requested to give the lender an extra route to recover funds if the business defaults.

Key factors that make a PG more likely include: limited trading history, small or no tangible assets, poor credit records, and high loan amounts. Conversely, lenders may waive or limit a PG where the company has strong audited accounts, long-term contracted income, alternative security (plant, vehicles, invoices) or when using specialist products.

Want to know what you’ll be asked for? Complete a quick enquiry for a Free Eligibility Check — Get Quote Now. Enquiries are free, quick (under 2 minutes) and do not affect your credit score.

Why lenders ask for personal guarantees (what a personal guarantee means)

What is a personal guarantee?

A personal guarantee is a legal promise by a director (or director(s)) to accept personal responsibility for repaying a business loan if the company cannot. It’s a contractual commitment that often sits alongside other security. A PG converts a business debt into a personal one for the guarantor if enforcement is required.

Why it’s common in construction lending

• Project revenue can be lumpy: construction firms often wait for staged payments or final account settlements, creating cashflow swings.
• Low tangible assets: many contractors are asset‑light (labour & materials) so lenders have little to seize.
• Retentions & disputes: unresolved client disputes or delayed retentions increase the risk a lender must shoulder.
• Subcontractor chains: businesses that rely on subcontracts can face higher default risk if a major contract is cancelled.

Types of personal guarantees

• Limited (capped amount) personal guarantee
• Unlimited personal guarantee (no cap — higher personal exposure)
• Joint and several guarantees (each guarantor can be pursued for the full debt)
• Director indemnities (broader wording; often paired with other securities)

Unsecured construction loans — where personal guarantees are more/less likely

When a personal guarantee is likely

Personal guarantees are more likely when:

• Loan size is significant: the larger the facility (from around £10,000 upwards), the more likely a lender will seek extra security.
• Short trading history: businesses with under 2 years’ consistent trading usually face PG requests.
• Poor or limited credit history: both company and director credit issues increase lender caution.
• Weak profitability or cashflow: lenders want a safety net where the business doesn’t show robust cash generation.
• Contracts without long-term certainty: tender‑to‑tender models are riskier than long fixed‑price framework agreements.

When lenders may avoid PGs

Lenders may forgo a PG if you can demonstrate:

• Strong audited accounts and cash reserves.
• Long, predictable contract pipelines with reputable clients.
• Material alternative security (equipment, property or a debenture).
• Product type that is secured against assets (asset finance) or based on invoices (invoice finance).

Typical lender approaches

• High‑street banks: cautious — PGs common for unsecured business lending unless the company is very well capitalised.
• Specialist lenders & brokers: more flexible — may assess contracts and sector performance and sometimes avoid PGs.
• Alternative finance: invoice finance, equipment finance or merchant cash advances often rely on the underlying asset/receivables rather than director PGs.

Alternatives and ways to reduce or avoid a personal guarantee

If you’d prefer not to give a personal guarantee (or want to limit exposure), consider these routes.

Negotiate limits and caps

Rather than refusing a guarantee outright, many directors successfully negotiate:

• Monetary caps (e.g. guarantee limited to a fixed sum).
• Time limits (sunset clauses that release signatories after X years if covenants are met).
• Release triggers based on repayment milestones or improved financial performance.

Offer alternative security

Providing lender-friendly security can remove the need for a PG:

• Asset finance secured on plant, machinery or vehicles.
• Fixed or floating charges on company assets or debtors.
• Property charges (if the business owns commercial real estate).

Specialist lenders and products

Some lenders and products are less PG‑centric:

• Invoice finance and factoring which use unpaid invoices as security.
• Asset finance for equipment purchases where the asset is the lender’s security.
• Peer‑to‑peer or challenger lenders who may assess risk differently.

To explore suitable options for construction firms and alternatives to standard unsecured loans, see our construction funding guidance on construction business loans — construction business loans.

Practical steps to strengthen your case

• Provide recent management accounts, VAT returns and a clear cashflow forecast.
• Show long-term contracts or evidence of repeat customers.
• Improve director credit profiles where possible.
• Work with a broker who specialises in construction finance to target lenders more likely to avoid PGs.

Get matched quickly — Free Eligibility Check.

Risks and legal implications of giving a personal guarantee

Director’s exposure and personal assets

Signing an unlimited PG can put personal assets — including savings and property — at risk if the company defaults. Even capped or limited guarantees carry enforcement risk if the company cannot meet repayment obligations.

Insolvency and joint & several liability

With joint & several guarantees, the lender can pursue any guarantor for the full debt, then seek contribution from co‑guarantors later. In insolvency situations guarantors may be pursued actively by creditors.

How to limit exposure

• Insist on a sunset clause or fixed cap.
• Agree limited security duration tied to performance milestones.
• Seek independent legal advice before signing — a standard and sensible step.

How UK Business Loans helps construction businesses find the right lenders

UK Business Loans does not lend money. We introduce construction companies to lenders and brokers who can offer finance solutions matched to each business’s profile — whether that’s a facility that requires a PG or one that doesn’t. Our service is free and designed to save time and improve your odds of a suitable outcome.

• Fast: our enquiry form takes under two minutes.
• Targeted: we match you to providers experienced in construction finance.
• Clear: submitting an enquiry is not an application and won’t affect your credit score.

Ready to see what you could qualify for? Get Quote Now — Free Eligibility Check. No obligation • Quick response • For loans from £10,000 upwards.

Practical FAQ — short answers

Do unsecured construction loans require a personal guarantee?

Sometimes — it depends on lender policy, loan size and the strength of your business accounts and contract pipeline.

Can I get a construction loan without a PG?

Yes — options include asset finance, invoice finance or specialist lenders who consider sector contracts and trading history instead of director guarantees.

Does a PG affect my personal credit?

A guarantee itself does not always appear on a personal credit report, but if the lender pursues you after default this can lead to personal liability events that may affect credit records.

Can I limit or cancel a PG later?

Often yes — negotiable features include caps, time limits and release clauses tied to company performance or refinancing.

What documents do lenders look for?

Recent accounts, management accounts, cashflow forecasts, evidence of contracts, director ID, and evidence of assets or invoices if offering alternative security.

Next steps — what to prepare before you apply

Preparing these items makes lenders work faster and reduces the chance they will insist on a PG:

• Last 12–24 months’ management accounts and latest year‑end accounts.
• Cashflow forecast covering the loan term and supporting contract schedules.
• Details of any existing borrowing and security in place.
• Copies of major contracts, purchase orders or certificates of retention.
• Director ID and contact details.

When you’re ready, complete our short enquiry to get matched with suitable lenders and brokers — Get Started — Free Eligibility Check. It’s free, quick and non‑binding.

Related reading

• Construction business loans — sector guide
• Asset finance options
• Invoice finance explained
• Privacy policy

1. Do unsecured construction business loans usually require a personal guarantee? — Short answer: sometimes; lenders commonly ask for a personal guarantee where a construction firm is young, asset‑light, has weak cashflow or is seeking a larger facility.
2. Can I get a construction loan without a personal guarantee? — Yes — some lenders and products (asset finance, invoice finance or specialist lenders assessing contract security and trading history) will lend without a director PG.
3. How can I reduce or limit the personal guarantee a lender asks for? — Negotiate a capped or time‑limited guarantee, offer alternative security (equipment, debtor book or property charge), improve financials, or seek specialist lenders via a broker.
4. Will submitting an enquiry with UK Business Loans affect my personal or business credit score? — No — completing our Free Eligibility Check/enquiry is not a loan application and won’t affect your credit score.
5. What alternative finance options avoid director personal guarantees for construction firms? — Common PG‑free options include asset finance secured on machinery, invoice finance/factoring using receivables as security, and some peer‑to‑peer or specialist facilities.
6. What documents will lenders typically ask for when assessing a construction loan application? — Expect to provide recent management accounts, year‑end accounts, VAT returns, cashflow forecasts, copies of major contracts/purchase orders and director ID.
7. How quickly will I be matched with lenders and receive responses after enquiring? — Our service typically connects you with suitable lenders or brokers within hours, though funding speed then depends on the chosen provider and product (from days to weeks).
8. What loan amounts can I search for through UK Business Loans? — Our network covers a wide range of facilities, typically from around £10,000 up to multi‑million pound commercial finance.
9. Are the lenders and brokers UK Business Loans connects me with regulated and reputable? — Yes — we work with experienced, UK‑based brokers and lenders who operate under FCA guidelines and standard fairness practices.
10. What are the main legal risks of signing an unlimited personal guarantee? — An unlimited PG makes you personally liable for the full debt if the company defaults, potentially exposing personal assets and creating joint & several liability if co‑guarantors are involved.