# Personal guarantee Source: https://businessloanbroker.ai/glossary/personal-guarantee/ Site: BusinessLoanBroker.ai (powered by Levr) > A personal guarantee makes you personally liable for a business loan if the business cannot pay. Learn what is typical, who signs, and what to negotiate. A personal guarantee is a promise that you will personally repay a business debt if the business cannot. Almost every small business loan requires one from owners with a meaningful stake, so forming an LLC or corporation does not protect your personal assets from a loan you guaranteed. ## Key facts - **Also called:** PG, guaranty, personal guaranty, unlimited or limited guarantee - **Where you will see it:** Nearly all business loans under a few million dollars, including SBA, online loans, cash advances and leases - **Why it matters:** If the business fails, the lender can pursue your home equity, savings and wages ## What is a personal guarantee? A personal guarantee is a separate legal promise, signed by you as an individual, that you will cover the business's debt if the business defaults. It sits beside the loan agreement and survives the business closing. If the company winds down owing $120,000, the lender can collect that $120,000 from you. Lenders ask for it because small businesses fail often and their assets are usually worth little at auction. The SBA requires a guarantee from every owner of 20% or more, and most banks follow the same rule. Our [personal guarantees guide](https://businessloanbroker.ai/guides/personal-guarantees/) covers how to limit one. ## How is a personal guarantee used? A guarantee only comes into play when the business cannot pay. - Your company borrows $200,000 over five years and you sign an unlimited personal guarantee. - Two years in, the business closes with $120,000 still owed. - The lender sells the business [collateral](https://businessloanbroker.ai/glossary/collateral/) and recovers $30,000. - You personally owe the remaining $90,000 plus interest and collection costs, and the lender can sue, garnish wages or place a lien on your home. A limited guarantee caps your exposure, for example at 50% of the balance or a fixed dollar amount. A joint and several guarantee with a partner lets the lender collect the whole amount from either of you. ## What do lenders consider normal? An unlimited personal guarantee from every owner of 20% or more is the industry standard. Banks, SBA lenders, online lenders, equipment lessors and cash advance providers nearly all require one. Loans without a guarantee typically exist only for larger, established companies with audited financials, or for products secured by strong collateral like real estate. Spouses are sometimes asked to sign when the family home is the main personal asset. Some lenders accept a limited guarantee for minority owners. Asking for a limit is normal and does not hurt your application, though a bank may say no. ## What should you watch for? Watch for a guarantee that covers more than this loan. Some cover any future debt to the same lender, including a card or line you open later. Ask for it to be limited to this agreement. Watch for a confession of judgment clause, which lets the lender get a judgment against you without a court hearing. It is common in cash advance contracts and restricted in some states. Watch also for the guarantee surviving a sale of the business: if you sell, make the buyer's lender replace your guarantee. Keep your own copy and read it before the loan agreement, not after. ## Related terms A personal guarantee is the personal counterpart to [collateral](https://businessloanbroker.ai/glossary/collateral/) and a [UCC lien](https://businessloanbroker.ai/glossary/ucc-lien/), which secure the loan with business assets. It appears on almost every [term sheet](https://businessloanbroker.ai/glossary/term-sheet/), and it is why [unsecured business loans](https://businessloanbroker.ai/business-loans/unsecured-business-loans/) are never truly unsecured from the owner's side. You will sign one on every [SBA 7(a) loan](https://businessloanbroker.ai/business-loans/sba-7a-loans/). You can apply here, or ask your AI assistant to flag guarantee terms across your offers and apply for you through our [MCP server](https://businessloanbroker.ai/agents/). ## Questions and answers **Can I get a business loan without a personal guarantee?** Rarely under a few million dollars. Some equipment and real estate loans with strong collateral, some revenue based products, and corporate cards for well funded startups skip it. Expect to sign one for most term loans, lines and SBA loans. **Does a personal guarantee show on my personal credit report?** Not by itself. If the business defaults and the lender pursues you, the collection, judgment or resulting personal debt can appear. Some lenders also report the loan itself to personal bureaus from day one. **Can I negotiate a personal guarantee?** Yes. Common asks are a dollar cap, a percentage matching your ownership share, a release after a number of on time payments, and limiting it to this loan only. Banks say no more often than online lenders, but it costs nothing to ask. ## Related - [Personal guarantees on business loans](https://businessloanbroker.ai/guides/personal-guarantees/) - [Collateral](https://businessloanbroker.ai/glossary/collateral/) - [UCC lien](https://businessloanbroker.ai/glossary/ucc-lien/) - [Unsecured business loans](https://businessloanbroker.ai/business-loans/unsecured-business-loans/) ## Apply Apply for the business: https://apply.businessloanbroker.ai/signup?utm_source=direct&utm_medium=organic&utm_content=md-personal-guarantee MCP server for AI agents: https://mcp.businessloanbroker.ai/mcp (docs: https://businessloanbroker.ai/agents/mcp/)