Bank calls in my loan, where do I stand on personal guarantees

Rodney Hylton-Potts specialist commercial lawyer advises.
I took out a  loan for my company two years ago. The business has been repaying it since then, but I made underpayments. When I spoke to my bank about the underpayments I was told there was no problem and it even increased our overdraft limit. The bank has now informed me that it is calling in the loan and using a personal guarantee that would place me in a lot of difficulty. Where do I stand?
This is sadly typical of many cases I see where banks, having the security of a personal guarantee, often act in a way that is contrary to the interests of the business, knowing that you, the business owner, will ultimately pay. In these situations the wording of the facility documentation and guarantee is crucial. In this case, the bank appears to have represented to you that it would waive the underpayments and even increased your overdraft facility. Undoubtedly, the written loan agreement will have a “no waiver” clause. It could be argued, however, that the verbal waiver by the bank manager induced the company to extend its liabilities by an increased overdraft.
This arrangement could amount to a new agreement, one of the terms being that earlier underpayments would not be relied upon to call in the loans. As guarantor, you could argue that the bank has breached the agreement and that the granting of any waiver or further advances to the business discharges your guarantee in its entirety. However, most bank guarantees are worded in the bank’s favour. Cases like this are heavily dependent on the particular facts and early advice should be taken.