Limited Sum Guarantee

A gurantee which is limited to a sum of money which is less than the total amount payable under a specific finance agreement. 

 

Product Description

In most cases where a number of Director or Shareholders sign a guarantee they are all jointly and severally liable for the entire sum due. This approach may be inappropriate when considering a group of Guarantors who are liable for the entire sum and their individual financial means and control over the respective company might differ. Arkle may offer a Limited Sum Guarantee enabling all the Guarantors to discuss and agree their maximum potential personal liabilities at the outset.

An example might be as follows: a company has three Directors, all of which are shareholders. The founder who is nearing retirement age owns 80% of the shares. Two young Managers have recently been promoted to Director status and they each own 10% of the shares. The founder has effective control over the business and makes all the important decisions. Should all Directrors sign a normal guarantee then all three are jointly and severally liable for all sums due. 

  1. In this hypothetical example Arkle is lending £200,000 using a Hire Purchase agreement for a new crane. The crane's value will be no less than £80,000 at the end of the Hire Purchase agreement. 

  • A Limited Sum Guarantee would enable a discussion to take place between all three Directors along the following lines:

    It might be the case that the founders's maximum liability is at £96,000 and the two young Directors is at £12,000 each.

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