Personal Guarantees and Security on Solar Finance (UK Guide)

Quick answer: A lender financing a solar system usually protects itself in two ways: security over the equipment, and, for a younger or thinner-covenant business, sometimes a personal guarantee from a director or owner. Under the Growth Guarantee Scheme a lender may still ask for a personal guarantee, but it cannot take a principal private residence as security. A guarantee is a promise to pay the company’s debt if the company does not, so read it, find out whether it is capped, and take independent advice before you sign. This is general information, not legal advice.

When you finance a commercial system through hire purchase, a green equipment loan or a lease, the funder is lending against the equipment and your business. How comfortable it is with that decides the price and, for some businesses, whether it asks for a director’s guarantee. Knowing what each protection is, and what you can ask for, puts you in a better position when the terms arrive. For the wider picture of the routes, see our guide to solar panel finance.

Security and a guarantee are different things

Security is the lender’s right over particular assets. With hire purchase, the funder usually keeps ownership of the system until the final payment and any purchase-option fee, so ownership is its protection. With a loan, the lender may take a charge over the equipment or over wider company assets. With a lease, the lessor owns the system throughout. A fixed or floating charge over company assets has to be registered at Companies House, which is why you can look up the charges that other lenders hold over a company.

A guarantee is a person’s promise to pay. It is separate from the security. A director’s personal guarantee makes the individual liable for the amount guaranteed even though the borrower is a limited company, which is its whole purpose.

When a lender asks for a director’s guarantee

A lender is more likely to ask for one when the company is young, its accounts are thin, the facility is large against its net assets, or the covenant is otherwise hard to assess. It is a commercial decision for each lender, and practice varies, so the useful step is to ask early what a lender requires rather than find out at the end. Our guide to solar finance for a new or weak-covenant business covers what lenders weigh, and what lenders look for in a solar finance application lists the documents to have ready.

What the Growth Guarantee Scheme says

The British Business Bank’s published rules for the Growth Guarantee Scheme are short, and read on 14 October 2026 they say two things relevant here. Personal guarantees can be taken at the lender’s discretion, in line with its normal commercial lending practice. And a principal private residence cannot be taken as security within the scheme. They also say the scheme gives the lender a 70% government-backed guarantee against the outstanding balance after its normal recovery process, while the borrower always remains 100% liable. In other words the government is backing the lender; nothing in the published rules reduces what you owe, and the protection for a director’s home is specific and limited.

Before you sign a guarantee

• Get the document and time to read it. Ask for the draft guarantee, not only the finance agreement, and read what it covers: the specific facility or all of your company’s debts to that lender.
• Ask whether it can be capped. Some guarantees are limited to a fixed amount or a share of the facility. Ask whether a cap is possible and, if it is agreed, have it written into the guarantee itself.
• Ask whether it can be released. Ask whether the guarantee falls away if conditions are met, for example after an agreed number of payments made on time. If the lender agrees, have the release trigger in the document.
• Understand that it is yours, not the company’s. The company’s debts are normally its own, but a guarantee is a separate promise by you, so it can be enforced against you personally.
• Know that it must be in writing. A promise to answer for another person’s debt has to be evidenced in writing and signed by the person giving it: section 4 of the Statute of Frauds 1677 says so.
• Take independent legal advice. A solicitor who acts only for you can explain the extent of your liability. It is not a formality.

If a spouse or partner is asked to guarantee

Where someone is asked to guarantee a business debt for their husband, wife or partner, the lender is on notice of a risk that the guarantee was not freely given. In Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44, the House of Lords held that a bank is put on inquiry in that situation and must take steps to protect itself, which in practice means insisting that the person receives independent legal advice before signing. The judgment is on BAILII. If you are the person being asked, you are entitled to that advice, and to ask questions of the solicitor.

Ways to reduce reliance on a guarantee

• A larger deposit or a shorter term reduces the lender’s exposure, which can reduce what it asks for. A shorter term raises the monthly payment, as the repayment table shows.
• A different structure. A lease, where the lessor owns the system, or a hire purchase agreement, where the funder keeps ownership until the end, puts the equipment at the centre of the lender’s protection. A guarantee may still be asked for.
• A facility backed by the Growth Guarantee Scheme, where the lender is accredited, may help a lender approve a business it would otherwise decline, and the carve-out for a principal private residence applies. The lender still decides.
• Comparing funders. Different funders ask for different things; see who finances commercial solar in the UK and the questions to put to each.

No structure removes the lender’s need to be comfortable with the credit, so be wary of anyone who promises that you will not need to give any security.