The Federation of Small Businesses (FSB) has written to the Financial Conduct Authority (FCA) to complain about the lending practices of banks that demand personal guarantees for small business loans of no more than £25,000.

This type of lending is not covered by FCA regulations and Bank of England figures show that this market accounted for around £5bn of gross monthly lending (excluding overdrafts).

Personal guarantees can be a ‘straitjacket’ on business growth, ‘forcing entrepreneurs to put their homes or other assets on the line when taking out finance’, the FSB warned. Currently, personal guarantees usually apply to loans taken out by companies which are guaranteed by their directors.

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