Understanding Commercial Debt, Personal Guarantees & Your Rights

1. What’s the Difference Between Consumer Debt and Commercial Debt?

Most people are familiar with consumer debt — credit cards, loans, car finance and personal borrowing. Commercial debt works very differently, especially once a business falls behind.

Here’s the simple breakdown:

Consumer Debt

  • Protected by the Consumer Credit Act (CCA 1974)

  • Strict rules on documentation

  • Lenders must prove compliance

  • Agreements can become “unenforceable”

  • FCA regulations and consumer protections apply

  • Enforcement tends to be slower and more supervised

In other words:
Consumers get strong legal protection.

Commercial Debt

  • Not covered by the Consumer Credit Act

  • Governed mainly by contract law and insolvency law

  • Lenders can move quickly

  • Fewer formal protections exist

  • Insolvency tools (Statutory Demands, Winding-Up threats) are used far more aggressively

  • Most commercial lending relies on a Personal Guarantee (PG)

In other words:
Commercial lenders have more power — unless you know where the weaknesses are.

2. What Is a Personal Guarantee (PG)?

A Personal Guarantee is a legally binding promise from a director or business owner that:

“If the company cannot repay the loan, you will, personally.”

When a PG is in place:

  • Your personal income

  • Your personal bank accounts

  • Your home

  • Your credit file

can all be targeted.

The PG effectively creates two debtors:

  1. The company

  2. You personally

This is why many lenders feel confident applying pressure — they believe the PG automatically guarantees payment.

But that is not always true.

3. Why Personal Guarantees Are Not Always Valid

Most people are shocked to learn how often PGs contain serious legal defects.
Our system looks for nine major categories of weaknesses that can stop or delay enforcement.

Here are the biggest ones:

1. Incorrect Signing or Witnessing

Many PGs are not executed properly.
Missing witnesses, wrong signature blocks, or incorrect capacity can make them challengeable.

2. No Independent Advice

If the guarantor wasn’t properly advised or did not understand the risks, the PG can be questioned.

3. Changes to the Loan Without Your Consent

If the lender increased the limit, extended the term, raised interest or made any variation without your agreement, the PG may be automatically discharged.

4. Wrong or Defective Demand

A lender must follow specific steps when calling in a guarantee.
If they do it incorrectly, enforcement can be blocked.

5. Assignment Problems (Debt Sold to a DCA)

When a debt is sold, the new owner must prove:

  • The assignment happened

  • The terms of that assignment

  • The debt amount at the moment of sale

Most DCAs cannot provide this.

6. Inflated or Incorrect Balances

Penalties, unjustified fees, interest errors and MCA sweeping mistakes can make the balance materially disputed — a powerful defence.

7. Misuse of Consent Orders and Tomlin Orders

Some lenders issue documents that look like court orders, but:

  • Have no judge

  • No seal

  • No case number

  • Come from Northampton CCBC (which cannot approve them)

These are not enforceable and can be challenged immediately.

8. Abuse of Insolvency Tools

Statutory Demands and Winding-Up threats cannot be used when a debt is:

  • Disputed

  • Incorrectly calculated

  • Not properly assigned

  • Linked to a defective PG

Our system automatically identifies these defects.

9. Data Protection & Credit File Issues

When lenders add commercial debt to your personal credit file or share your data unlawfully, you gain powerful leverage under GDPR.

4. What This Means for You

Even though commercial debt looks intimidating — and lenders act aggressively — there are many points of challenge, especially when a Personal Guarantee is involved.

Freedom Financial’s system is built to:

  • Uncover weaknesses

  • Expose defective guarantees

  • Challenge incorrect balances

  • Question assignments

  • Stop invalid insolvency threats

  • Identify fake/defective orders

  • Protect your personal position

Commercial debt is not the “automatic win” lenders want you to believe.

5. When Should You Use Our Tools?

Our system is designed to help you if:

  • Your business has fallen behind on a loan

  • You’ve been asked to pay under a PG

  • A DCA claims to “own” the debt

  • You’ve received a Statutory Demand

  • A lender threatens court action

  • Your personal credit file is affected

  • You've been sent a Consent Order/Tomlin Order to sign

  • You're unsure if the balance is correct

We analyse the documents, explain your options, and highlight challenge points based on UK law and proven casework.

6. Summary

Consumer debt = strong legal protections.
Commercial debt = fewer protections, but far more weaknesses than lenders admit.
Personal Guarantees = powerful for lenders, but surprisingly fragile when examined properly.

Freedom Financial gives you a clear, structured way to understand your position and challenge anything improper, unfair, or unenforceable.