Business Loans You Can Get Without a Personal Guarantee
Personal guarantees are typically required for small-business loans, but you may be able to forgo them in certain circumstances.
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A personal guarantee on a business loan reduces a lender’s risk. Personal guarantees are a standard practice for most business loans, but the requirement is up to the discretion of the lender.
Signing a personal guarantee on a small-business loan can increase your likelihood of approval. It may also improve your interest rates and terms. Business loans you can get without a personal guarantee will depend on factors like your business finances and history, assets available for collateral and lender policy.
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Terms to know before you dive in:
- Cosigner: an individual you trust to take over loan payments if you can’t make them.
- Collateral: assets you’ll surrender to the lender if you fail to pay back your loan.
- Default: repeatedly failing to make payments on your loan without coming to an agreement with your lender.
- Secured business loan: financing backed by physical or non-physical assets (collateral).
- Unsecured business loan: financing that doesn’t require collateral.
What is a personal guarantee on a business loan?
A personal guarantee is a document signed as a part of a business loan agreement. It promises that an individual borrower will repay the loan in the event that the business can’t. When you sign a personal guarantee, you are acting as a cosigner on your business’s loan. This means that your personal assets may be seized if your business defaults on the loan.
Personal guarantees are common to most business loans. Even unsecured business loans often require a borrower, or any owner of over 20% of the business, to sign a personal guarantee.
Lenders that don’t require a personal guarantee
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| Product | Max loan amount | Min. credit score | |
|---|---|---|---|
 Wells Fargo Prime Line of Credit Nerdwallet Rating with Fundera by NerdWallet | $3,000,000 | 680 | with Fundera by NerdWallet |
 Fora Financial - Revenue advance with Fundera by NerdWallet | $1,500,000 | 570 | with Fundera by NerdWallet |
 Forward Financing - Merchant cash advance with Fundera by NerdWallet | $500,000 | 500 | with Fundera by NerdWallet |
 Credibly - Merchant cash advance with Fundera by NerdWallet | $600,000 | 500 | with Fundera by NerdWallet |
 Libertas Funding - Revenue-based advance with Fundera by NerdWallet | $5,000,000 | 650 | with Fundera by NerdWallet |
Lenders that don’t require a personal guarantee in some cases
| Product | Max loan amount | Min. credit score | |
|---|---|---|---|
 Triton Capital - Equipment financing Nerdwallet Rating with Fundera by NerdWallet | $250,000 | 575 | with Fundera by NerdWallet |
 Giggle Finance - Merchant cash advance with Fundera by NerdWallet | $15,000 | 300 | with Fundera by NerdWallet |
 Uplyft Capital- Merchant cash advance with Fundera by NerdWallet | $500,000 | 475 | with Fundera by NerdWallet |
 Expansion Capital Group - Merchant cash advance with Fundera by NerdWallet | $300,000 | 500 | with Fundera by NerdWallet |
🤓 Nerdy Tip
Some lenders require a performance guarantee rather than a personal guarantee. This is a document promising that all the information you’ve provided to the lender is accurate and that you won’t do anything that goes against the contract. A performance guarantee does not put your personal assets at risk. Some of the lenders in the tables above require a performance guarantee. Business loans you can get without a personal guarantee
Business loans that you can get without a personal guarantee normally require some other form of collateral to secure the loan. This requirement will vary based on the type of loan and the lender.
Term loans
Depending on the lender and your creditworthiness, term loans are one of the most affordable types of business loans. They provide a lump sum of capital upfront that is repaid over a set period of time, with interest.
Business term loans often require a personal guarantee. But you may be able to negotiate, especially if you have strong personal or business collateral to offset the lender’s risk.
Lines of credit
Business lines of credit are revolving sources of capital. You spend up to a certain limit and continue to draw on the line once you’ve repaid the amount borrowed. You only pay interest on what you’ve drawn.
A business line of credit without a personal guarantee will likely require another way of securing the line. For example, the Wells Fargo Prime Line of Credit does not require a personal guarantee. It is secured instead by a first position lien on business assets.
Equipment loans
Equipment financing loans are secured by the equipment being financed. So you may have an easier time finding equipment lenders that don’t require personal guarantees.
Triton Capital, for example, is a California-based lender that offers equipment financing. In some cases, it does not require a personal guarantee.
Merchant cash advances
Merchant cash advances (MCAs), or revenue advances, are not structured as loans. Therefore they may be more likely to waive a personal guarantee requirement. Credibly, for example, is an alternative business lender that does not require a personal guarantee or collateral on its MCAs. It only files a Uniform Commercial Code (UCC) lien on deals over $200,000.
MCAs are not regulated the same way traditional business loans are. They’re one of the most expensive and riskiest types of business financing. MCAs are best used for short-term needs and as a last resort.
Invoice financing or invoice factoring
Invoice financing is a type of small-business loan that uses your unpaid customer invoices as collateral. With invoice factoring, you sell your unpaid customer invoices to a third-party company that collects on the invoices.
Both types of lenders are primarily focused on the creditworthiness of your customers, so they may not require a personal guarantee. But this is ultimately dependent on the lender.
» MORE: Best invoice factoring companies
Why do lenders require a personal guarantee?
A personal guarantee protects a lender and decreases their risk when lending to your business. It allows them to seize your personal assets in the event of a loan default, helping them recover some of their losses.
When you are willing to sign a personal guarantee, it also shows a lender that you are invested in the success of your business. That likely means you’re especially motivated to make your loan payments.
What are the consequences of signing a personal guarantee?
Signing a personal guarantee shouldn’t have any immediate consequences to your finances. The document doesn’t cause a business loan to appear on your personal credit report or allow a lender to seize any personal assets without reason.
If your business is unable to pay the loan, however, a personal guarantee means that you are personally liable. This may mean covering the loan payments from your personal income or handing over personal assets that can be used to pay off the loan amount. Lenders may report collection efforts to personal credit bureaus during this process. This can negatively affect your personal credit.
How can you avoid signing a personal guarantee?
Finding a business loan that doesn’t require a personal guarantee is possible, but it may require some negotiation. Since personal guarantees serve to protect lenders, you’ll need to find other ways to offset that risk.
- Separate your business legal structure. Establishing your business as a separate legal entity is likely the first step in avoiding a personal guarantee. Structuring your business as a corporation or LLC rather than a sole proprietorship will allow you to build separate business credit. It will also demonstrate that your business’s cash flow, revenue and assets are independent of any personal contribution. These send strong signals for your ability to repay the loan
- Establish business credit. Having strong, established business credit that demonstrates a positive history of repayment. This may offset some of the lender’s risk and show them that your business is likely to repay the loan. The catch is that to build your business credit, you’ll need a loan or a credit card. And that likely requires a personal guarantee.
- Offer other high-value collateral. Business assets like real estate or large equipment are a great way to offset lender risk, especially if they’re worth more than your personal assets. Certain types of asset-based lending may waive the personal guarantee requirement. But if not, it may be worth trying to negotiate with your lender if you have high-value collateral.
Other funding options that don’t require personal guarantees
Business credit cards. Business credit cards function a lot like personal credit cards. You can spend up to a certain limit continually as you pay your balance. You’re only charged interest on any unpaid balance you carry over from month to month. Many business credit cards do require personal guarantees but not all.
Business credit cards that don’t require personal guarantees have other requirements to offset the risk. Ramp’s corporate card, for example, requires a minimum of $25,000 in a business bank account.
Crowdfunding. Crowdfunding is a way to raise capital through online platforms. Individuals can invest small amounts in your company in exchange for rewards or sometimes equity in your business. Crowdfunding can be a great way to avoid business debt, pledging assets as collateral and having to sign a personal guarantee.
Small-business grants. Small-business grants are another way to finance your business without signing a personal guarantee. Grants are available from local and federal government sources, nonprofit organizations or large corporations. They can take time and effort to research and apply for. But they may pay off in the long run if you’re able to avoid going into business debt.
Frequently Asked Questions
Do SBA loans require a personal guarantee?
Yes. Standard SBA loans require a personal guarantee for any owner of 20% or higher. Guarantee requirements for SBA disaster loans may vary based on the program and the loan amount.
Can I get a business loan without a personal guarantee?
Yes, it is possible to get a business loan without signing a personal guarantee depending on the type of financing and the lender’s policy. You will likely need to reduce the lender’s risk in other ways, such as strong personal credit or business collateral.
Can you get a business loan with bad personal credit?
It’s possible to get a business loan with bad personal credit, but you may need to offer collateral or pay a higher interest rate.
On this page
- What is a personal guarantee on a business loan?
- Lenders that don’t require a personal guarantee
- Lenders that don’t require a personal guarantee in some cases
- Business loans you can get without a personal guarantee
- Why do lenders require a personal guarantee?
- What are the consequences of signing a personal guarantee?
- How can you avoid signing a personal guarantee?
- Other funding options that don’t require personal guarantees
