EXPERTS are warning of a little-known business credit card catch that could put your personal finances at risk.
Flexible finance, including small business credit cards, remains the most frequently used type of borrowing among UK small medium enterprises (SMEs), but most directors don’t realise it carries exactly the same personal risk as a six-figure business loan, experts say.
The warning comes as creditors’ voluntary liquidations (CVLs) rose almost 9% in July 2026 compared with June, according to the latest Insolvency Service figures.
Many directors are only discovering the true extent of their personal financial exposure once it’s too late and the majority of small business credit cards require a personal guarantee as standard.
This means the director, not just the company, is on the hook if the business can’t pay despite assuming their limited company status protects them the way it does for other business debts.
Liability
Todd Davison, Managing Director of Purbeck Insurance Services, said directors need to consider whether that risk is protected.
He added: “The 9% rise in creditors’ voluntary liquidations (CVL) in July, from June, is concerning – every CVL is a director who has reached the end of the road and taken the very difficult decision to close down their business. In most cases, the cost of doing business has just become too much, and that decision will ripple through their lives, the people they employ and the communities in which they operate.
“A CVL can also make the director personally liable for any debt their business may owe, if they have given personal guarantees to secure finance, lease premises, or keep suppliers on side while trying to keep the business trading. Insolvency wipes out the company’s liability, not the director’s – and that includes the personal guarantee behind a business credit card.
“These figures are a timely reminder for any director relying on personal guarantees – however small they may seem at the time – to understand exactly what they’ve signed up to, and to consider whether that risk is protected.”
Harvey Dhillon, Founder & CEO at Zmartly, said you need to know what you are signing up to.
He added: “A personal guarantee is not the small print. It is the reason you were lent the money at all. Most small companies have no track record to lend against, so the director’s signature is the security. Remove it and most of that credit goes too. Limited liability caps what you can lose at what you put into the company.
“A guarantee sits outside that cap, because it is a separate promise from you to the lender. When the company cannot pay, the lender comes to you, and limited liability is no answer. Of 1,931 company insolvencies in July, 1,497 were creditors’ voluntary liquidations. That is a director closing their own company, exactly when a guarantee gets called in.
“Yes, we hold a company card, and yes, I read the guarantee before signing. I knew the insurance existed and have never bought it. Whether it is worth the premium depends on the size of the guarantee, which is a broker’s question. Know what you have signed, and what it would cost you.”
Cost
Tony Sanchez, Founder at Bridging Loan Directory, said he was unaware that his company credit card was carrying a personal guarantee.
He added: “I have a company credit card, but I was not aware that it might carry a personal guarantee. Like many directors, I assumed the protection provided by operating through a limited company extended to routine card borrowing unless I had knowingly signed a separate guarantee.
“I had recently become aware that personal guarantee insurance existed, but thought it was principally relevant to business loans and overdrafts rather than an everyday company credit card. I have never used it. This has prompted me to check the terms of my own card. That is probably the wider lesson: directors should not treat a business credit card as an ordinary administrative product.
“They should establish whether they have given a personal guarantee, what liability it creates and whether it remains appropriate as the balance or credit limit changes. A significant personal commitment should be made conspicuous, not left for directors to discover when their company is already in difficulty.”
