What happens when a personal guarantee is called in?
When a personal guarantee is called in, the lender is asking you personally to pay what the business owes. A demand usually arrives in writing once the business has defaulted or a facility has not been repaid. The notice itself will state the amount claimed and the timeframe. What follows depends on the wording you signed. Some guarantees are capped, some are unlimited, some are backed by a mortgage over property. Getting the document in front of your own adviser early matters.
What a lender usually does next
Most lenders start with a written demand rather than a court. From there the usual paths are a negotiated repayment arrangement, a period to refinance or sell an asset, or recovery action against whatever the guarantee is supported by. If you signed a mortgage over a property alongside the guarantee, that property is normally the lender’s first port of call. Other things that commonly come up.
- Whether the guarantee is limited to an amount or open ended
- Whether other directors signed the same document
- Whether the debt has been sold to a collections firm
Where to get help with this
This is legal and financial territory, so most people start with their own accountant, a solicitor or a registered insolvency adviser. The free Small Business Debt Helpline on 1800 413 828 exists for exactly this. On the commercial finance side, a broker can look at whether a refinance genuinely stacks up against property equity, unencumbered plant or a debtor book, then say plainly when it does not. Sometimes the numbers work. Sometimes they don’t. Knowing which one you’re looking at early is worth more than another application.
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Last updated 15th July 2026. Reviewed by Authorised Credit Representative 554584 of Australian Credit Licence 414426.