SMEs hit by House of Lords ruling

Directors of small and medium-sized enterprises (SMEs) could be forced to give personal guarantees and hand over personal assets in order to obtain business loans after a landmark decision in the House of Lords yesterday.

The judgment overturns 25 years of banking practice and means banks will no longer have first call on money recovered from collapsed businesses.

Stephen Alambritis, head of parliamentary affairs at the Federation of Small Businesses, said: “We hope the banks won’t have a knee-jerk reaction and that they will look at the risk posed by the individual entrepreneur and business rather than seeking an arm and a leg in security.”