A personal guarantee reduces a lender’s risk by making you personally responsible for repayment. Most small-business loans require a personal guarantee. In fact, 59% of business debt holders have secured their debt with a personal guarantee — according to the Federal Reserve Banks’ Small Business Credit Survey.
Signing a personal guarantee can boost your approval odds and may help you get better rates and terms. Getting financing without one is possible, but it depends on factors like your business finances and history, available 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 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.
Financing options 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 NerdWallet Small Business | $3,000,000 | 680 | with NerdWallet Small Business |
 Fora Financial - Revenue advance with NerdWallet Small Business | $1,500,000 | 570 | with NerdWallet Small Business |
 Giggle Finance - Merchant cash advance with NerdWallet Small Business | $15,000 | 300 | with NerdWallet Small Business |
 Forward Financing - Merchant cash advance with NerdWallet Small Business | $500,000 | 500 | with NerdWallet Small Business |
 Triton Capital - Equipment financing Nerdwallet Rating with NerdWallet Small Business | $250,000 | 575 | with NerdWallet Small Business |
 Uplyft Capital- Merchant cash advance with NerdWallet Small Business | $500,000 | 475 | with NerdWallet Small Business |
 Credibly - Merchant cash advance with NerdWallet Small Business | $600,000 | 500 | with NerdWallet Small Business |
 Expansion Capital Group - Merchant cash advance with NerdWallet Small Business | $300,000 | 500 | with NerdWallet Small Business |
 Libertas Funding - Revenue-based advance with NerdWallet Small Business | $5,000,000 | 650 | with NerdWallet Small Business |
🤓 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 table 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
Best for: Specific purchases; large investments or expansion.
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
Best for: Flexible working capital, emergency funding.
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 form of security. For example, the Wells Fargo Prime Line of Credit does not require a personal guarantee, but it’s secured by a first position lien on business assets.
Equipment loans
Best for: Purchasing equipment.
Equipment financing loans are secured by the equipment being financed. As a result, 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.
Invoice financing or invoice factoring
Best for: B2B companies with cash tied up in outstanding invoices.
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’re less likely to require a personal guarantee — though some still do.
» MORE: Best invoice factoring companies
Merchant cash advances
Best for: Borrowers with significant credit and debit card sales; last-resort option.
Merchant cash advances (MCAs) are not structured as loans; instead, you receive a lump sum and repay it using a percentage of your card sales.
Because of this unique structure, lenders may be more likely to waive a personal guarantee requirement. Credibly, for example, is an alternative 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.
Keep in mind: MCAs are not regulated like traditional business loans. They’re one of the most expensive and riskiest types of business financing. In general, you should consider all other options before turning to an MCA.
Nerdy Perspective
"I’ve been covering small-business loans for seven years, and in my experience, personal guarantees are a necessary evil. You can find options without them, but they tend to cost more and strain your cash flow. If you want the best rates and terms, you’ll probably have to sign one."
Why do lenders require a personal guarantee?
A personal guarantee protects the 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’re willing to sign a personal guarantee, it shows the lender that you're invested in the success of your business and gives you added incentive to keep up with 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.
Here are a few things you can do:
- 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, shows a lender that your business’s cash flow, revenue and assets are independent of your personal finances.
- Establish business credit. A strong, established credit history — separate from your personal credit — shows a lender that your business can repay a loan on its own. 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
Small-business grants
Consider if: You want to avoid debt.
Small-business grants can help you finance your business without 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.
Corporate cards
Consider if: You’re a high-growth startup with significant revenue.
Business credit cards that don’t have personal guarantees are typically corporate cards that have other requirements to offset the risk. Ramp’s corporate card, for example, requires a minimum of $25,000 in a business bank account.
Many small businesses will not be the right fit for a corporate card. Standard business credit cards are a good option for covering everyday expenses, but these products will require a personal guarantee.
Crowdfunding
Consider if: You have an established online presence and following.
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.
Frequently asked questions
Do SBA loans require a personal guarantee?
Yes. Standard SBA loans require a personal guarantee for anyone who owns 20% or more of the business. 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’s 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 having strong personal credit or providing 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.
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- 1. Federal Reserve Banks. 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey. Accessed Jul 8, 2026.
