Funding Circle chasing a personal guarantee? Read this first

If Funding Circle is chasing you personally, the first thing to understand is that you are not in a corporate-debt situation — you are in a personal-guarantee situation. Funding Circle was the UK’s largest peer-to-peer SME lender. Almost every business loan they originated was made to a limited company but backed by a written personal guarantee from a director. When the company defaults or is dissolved, the PG becomes the route Funding Circle uses to recover from the director personally.

This is the critical distinction this guide covers — and the reason an IVA can cleanly resolve the situation, even where the limited company has gone under.

Who Funding Circle are

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Funding Circle is a UK-based, FCA-regulated lending platform that operated a peer-to-peer marketplace connecting investors with small-business borrowers. Although the platform has reshaped its business since 2017, the legacy SME loan book is large and Funding Circle (and its assignees) continues to pursue defaulted loans.

Their consumer-facing image is “lending to UK businesses”. The reality for the directors who signed the paperwork is that almost every loan came with a personal guarantee as standard. That PG is a separate, signed contract — it doesn’t disappear because the limited company has been struck off, liquidated or dissolved.

Personal guarantee — the part most directors miss

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A personal guarantee is a separate written contract by which the director (the guarantor) promises to pay the company’s loan if the company doesn’t. The legal effect is to pull the debt outside the corporate veil. Two important consequences:

• Limited liability doesn’t protect you. The whole point of a PG is to bypass the limited-company structure. If the company defaults, the lender pursues the director personally
• The PG survives the company. If the company is dissolved, struck off or liquidated, the company’s debt to Funding Circle disappears with it — but the PG you signed remains your personal obligation

For IVA purposes, a personal guarantee on a defaulted business loan is unsecured personal debt in your own name. It goes into an IVA on the same basis as a credit card, personal loan or overdraft.

What Funding Circle (or its assignee) can and cannot legally do

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Funding Circle and any firm acting on their behalf must operate under the FCA’s CONC rules for the recovery part of the loan. They can:

• Write to you and call you on numbers you supplied
• Apply for a County Court Judgment (CCJ) against you personally for the guaranteed amount
• After a CCJ, apply for an attachment of earnings, charging order on a property (including your home), or instruct High Court Enforcement Officers
• Sell the PG-backed debt to a debt purchaser

What they cannot do without a court order:

• Force entry to your home
• Take goods, including from your driveway
• Threaten arrest — the matter is civil, not criminal
• Pursue the company’s debt against you personally without enforcing the PG itself
• Add fees not within the original loan agreement and PG

A charging order on a homeowner’s property is a particularly common Funding Circle enforcement step on PG defaults, because directors are often homeowners.

Step 1 — confirm what was actually signed

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Before paying anything, ask in writing for:

• A copy of the executed personal guarantee with your signature
• A statement of account showing how the company’s loan was applied and what is now outstanding under the PG
• The notice of assignment if Funding Circle has sold the debt to another firm

PG documentation is occasionally defective: missing signatures, wrong company details, caps not properly drafted, or the PG limited in time and out of date. If the PG cannot be produced as a valid executed document, the personal liability is not enforceable.

Step 2 — check whether the debt is statute-barred

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A personal guarantee is a simple contract debt subject to the Limitation Act 1980. In England and Wales, six years from the cause of action — typically the date of the company’s default and demand under the PG — without payment, written acknowledgement or court action blocks enforcement. In Scotland the period is five years and the debt is extinguished, not just unenforceable.

If the dates fit, write stating that you consider the PG statute-barred and ask them to remove their contact. Don’t make a token payment before checking — it resets the limitation clock.

Step 3 — choose the route out

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If the PG is valid and the limitation period hasn’t expired, the question is what you can realistically afford. The honest options:

• Pay in full with a discount where possible — Funding Circle and its assignees will sometimes accept a settlement at less than the guaranteed amount, particularly where the company is gone and a homeowner director is the only realistic asset
• Affordable repayment plan based on what you can afford after household essentials
• IVA if you owe £5,000+ of total unsecured debt — the PG goes in alongside any credit-card or other unsecured debt. Once the IVA is approved, Funding Circle cannot pursue the PG and the unpaid balance is written off at the end of the term
• Debt Relief Order for total unsecured debt under £50,000 with very low spare income
• Bankruptcy where no realistic monthly payment is possible — protects the home only if the equity is below the trustee’s threshold

For homeowner directors, an IVA is often the cleanest fit: it includes the PG, freezes interest, stops enforcement, and avoids the asset risk that bankruptcy carries.

Pitfalls when Funding Circle are involved

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• Don’t assume limited-company status protects you. The PG was the whole point of the lender requiring a personal signature
• Don’t ignore CCJ paperwork. Default judgments on PGs are common and lead straight to charging orders on homeowner directors
• Don’t make a token payment on the PG before checking the dates — it resets the limitation clock
• Don’t deal verbally. Stay in writing on every interaction with Funding Circle or its assignee
• Don’t conflate the company debt with the PG. Liquidating the company does not extinguish the PG

Frequently asked questions

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Is Funding Circle a debt collector? No — Funding Circle is the original creditor (or, for sold loans, the original creditor before assignment). The chase comes via the personal guarantee given when the SME loan was taken out.

Can a Funding Circle PG go into an IVA? Yes. A personal guarantee is unsecured personal debt and goes into an IVA on the same basis as a credit card or personal loan.

My company has been dissolved — am I still liable? Yes. The PG is a separate contract that survives the company.

Can Funding Circle put a charge on my home? Yes. After a CCJ on the PG, they can apply to the court for a charging order on a property you own. An IVA approved before judgment prevents that step.

Related guides

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• Lowell Financial — UK’s largest debt purchaser
• How long can I be chased for a debt?
• Can debt be written off?
• Do debt collectors give up?
• How do I apply for an IVA?