It seems that, as a small business I’m being asked to provide director guarantees more frequently and by more types of organisations. We are growing, profitable and have a blemish-free credit record. But nowadays that just does not seem to be enough.
We’ve got used to the banks asking for director’s guarantees for everything even though it annoys me when I think about it. I always thought they charged interest to cover the risk. Now when we lease equipment the finance companies do the same thing. The latest fashion is for large suppliers, who think they can bully small businesses, asking for guarantees as well.
I’m sure these large suppliers are taking their lead from the banks. And they do it because they can. These large suppliers take the view that since they’re so big, a small business account is not that important… so they can take it or leave it. Their attitude is ‘sign up or go away’.
I believe this practice may continue to escalate to the point where it will need to be unlawful to use director’s guarantees to circumvent limited liability to stop it. Otherwise what’s the point of being a limited company?