In the commercial world, it is not uncommon for a supplier to require a customer to provide a guarantee for payment. Generally, this is where the customer is a limited company and the guaranteeing party is a person, usually a director. However, a guarantee can be provided by one company on behalf of another, or by an individual for another individual – such as on a loan or rental agreement. Whatever type of guarantee agreement you have in place, if the customer has failed to make payment and you want to begin a debt recovery claim against the guarantor, then Debt-Claims Solicitors are here to help.
There are a few important points and steps to note about debt recovery from a guarantor:
- The first step that a creditor should take is to send a Letter Before Action (LBA) and with Debt-Claims, for just £12.50, you can send an LBA to your debtor today.
- If the guaranteed contract is a commercial contract (i.e. the creditor and customer were acting in the course of a business transaction) then irrespective of whether the guarantor is an individual, you may still be able to claim interest and compensation pursuant to the Late Payment of Commercial Debts (Interest) Act 1998 (the Late Payment Act). You will need to check if the guarantee agreement entitles you to just the invoice balance or all monies owed by the guaranteed party, if the latter and if it’s a commercial agreement, that the Late Payment Act entitles the creditor to interest (at 8% per annum above the Bank of England base rate), compensation per unpaid or late-paid invoice, and a sum for any reasonable costs incurred which are not covered by the compensation – this could be costs incurred by a third party chasing the debt on the creditor’s behalf, for example. At Debt-Claims, our portal identifies any matters that are commercial and gives the creditor the option to claim the relevant interest and compensation. Alternatively, the guarantee agreement may entitle you to contractual interest. If neither of the above apply, there is still a general entitlement to claim interest pursuant to the County Courts Act 1984 at 8% per annum. When processing an instruction through our portal, it gives you the option to add a claim for interest if you require it.
- If the debtor does not make payment following the LBA, then proceedings will need to be issued against them. With Debt-Claims’ portal, an LBA can be escalated to a money claim in less than 30 seconds and as our portal is integrated with the Court’s Money Claims Online system, as soon as it is submitted via our portal then it is submitted to the Court. This allows for an instant turnaround on instructions for claims, judgments, and enforcement. Crucially, for all uncontested small claims matters (less than £10,000) Debt-Claims only charges the same costs that are recoverable from the debtor and automatically adds these onto the claimed balance. This means that once a creditor has been paid, their costs are recoverable in full.
If you or your business are owed money by a guarantor, then let Debt-Claims collect that money quickly and cost effectively. Once you’ve registered for free with Debt-Claims and chosen the service you require, simply choose the agreement type ‘guarantee’ and answer the additional questions, our portal will then draft bespoke documents based on that agreement type.