Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Loan definition

What does Loan mean? In legal practice, a loan is an advance of money by a lender to a borrower with a binding obligation to repay the principal sum, usually with interest, either on demand or at agreed dates during a term. Loans may be secured or unsecured and may be documented as a loan or facility agreement, promissory note or deed. Repayment may be amortising or bullet. Interest and fees (for example, arrangement, commitment or default interest) are commonly payable but are not essential to a loan’s validity. The term is a descriptive expression used across commercial, consumer and corporate finance; specific statutes...

Personal guarantees by individuals in commercial lending: capacity, undue influence, antecedent transaction risks, moratoria, and consumer protections (England and Wales)

Published by a LexisNexis Banking & Finance expert

Practice notes

A guarantee operates as a species of quasi-security (see Practice Note: Guarantees). Within commercial finance, guarantees frequently serve as a standard form of credit support in lending transactions and wider arrangements. For instance, where a company is the borrower, the lender may seek guarantees from its directors. More rarely, and typically at the smaller end of the commercial finance market, the lender may ask a closely related family member of a director—such as a spouse, civil partner, or parent—to act as guarantor for the borrower. When obtaining an individual’s guarantee, a number of additional matters arise beyond those encountered in the general law of guarantees. This Practice Note sets out the principal issues to address when taking an individual guarantee in a commercial financing context, namely:

the capacity of individuals to grant guarantees
undue influence
voidable transactions
moratoriums under the debt respite scheme, and
the potential applicability of consumer related rules, regulations and legislation

The discussion focuses on the following areas, which are considered in turn.

Capacity

The notion of capacity concerns a person's ability to enter into contracts and to carry out other acts...

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Web page updated on 21/05/2026

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