Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether she plans to further regulate business lending where (a) a private residence is used as security (b) personal guarantees are required as a condition of the loan.

The Government has set out its plans in this area in its small business strategy, ‘Backing Your Business’, published this summer, and in the Government’s reply to the Call for Evidence on SME Finance, published earlier this month.

As set out in the Government’s small business strategy, the Government is committed to working with lenders to ensure the appropriate use of personal guarantees. This includes the introduction of a mandatory Code of Conduct for accredited lenders that use the British Business Bank’s Growth Guarantee Scheme, to ensure that personal guarantees under the Scheme are used fairly and transparently.

The Government is also working with UK Finance to build on its existing lender commitments to use personal guarantees responsibly, and with the business finance community to help businesses access the right finance on the right terms, including where personal guarantees are involved.

More widely, personal guarantees can play a necessary role in business lending, where they may help enable SMEs to access lending that might otherwise not be advanced, or where the price of lending would deter SMEs from accessing finance. This includes cases where a business has limited or no trading history, nor assets for use as collateral to access debt finance. While personal guarantees may be called upon, this does not automatically result in enforcement action, and property repossessions linked to personal guarantees remain rare.

The Government will continue to keep the issues relating to personal guarantees under review and promote further transparency around their use.