Any borrower seeking funds to invest in a small business should seek legal advice. It is important for that borrower to understand the extent of the obligations in obtaining the funds.

It is sometimes the case that the borrower is not the person or entity carrying on the business and therefore the borrower is really an investor in the business. In that case the borrower/investor will also need advice on how that investment is protected, if at all, and what will happen to the invested funds should the business be unsuccessful.

In some borrowing arrangements the borrowing entity is a trust or a company and personal guarantees from directors and shareholders of the company and beneficiaries of the trust are required. Again, specific legal advice is required for those providing personal guarantees so that these people fully understand the extent of their liability in the business.