Personal Guarantees for Business Loans: What to Know Before Signing

Signing a personal guarantee on a business loan can put your savings, house and car on the line. Before you sign, make sure you know what it can mean for your business and personal finances. 

What is a personal guarantee on a business loan?

A personal guarantee is your promise to repay a business loan with your own money if your business defaults. If that happens, the lender may go after your personal assets, such as your savings, house or car.

A personal guarantee is similar to business collateral in that it provides lenders assurance and helps some businesses get credit they may not qualify for otherwise.

There are two types of personal guarantees on business loans:

Unlimited personal guarantees

These generally mean you’re responsible for paying everything owed to the lender until the loan is paid in full.

For example, if the business borrows $100,000, the borrower with an unlimited personal guarantee is personally responsible for repaying the debt if the business can’t.

You might also be on the hook for any legal fees your lender incurs, as well as accrued interest.

Limited personal guarantees

These are often used when a business has more than one owner. A limited guarantee caps how much you personally owe if the business defaults. They typically work in one of three ways:

• Percentage of balance. You’re responsible for a percentage of what’s still owed on a loan, often matching your share of ownership. For example, if you own 25% of the business and there’s an outstanding loan of $100,000, you might be on the hook for $25,000.

• Set dollar amount. You guarantee up to a specific amount, such as $50,000 on a $200,000 loan.

• Time limit. Your personal guarantee expires after a certain amount of time, or once the balance drops below a certain amount.

However, limited personal guarantees may include “joint and several liability,” which means the lender can demand payment for all of the debt from one, some or all of the guarantors

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PWC. 2.1 Guarantees and joint and several liabilities—overview. Accessed Oct 14, 2026. View all sources .

Do all business loans require a personal guarantee?

Personal guarantees are required for most types of business financing, including term loans, business lines of credit and business credit cards. Even many unsecured loans require a personal guarantee.

SBA loans

The Small Business Administration requires unlimited personal guarantees from borrowers who own 20% or more of a business applying for an SBA loan

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U.S. Small Business Administration. Unconditional Guarantee. Accessed Oct 14, 2026. View all sources .

» MORE: Are SBA loans personally guaranteed?

Bank loans

Here are examples of bank lenders that require personal guarantees for one or more of their business loans:

• Wells Fargo.

• Navy Federal.

• Chase.

• PNC Bank.

» MORE: Best banks for small-business loans

Online loans

Getting a loan online often comes with a personal guarantee. These lenders, for example, require a personal guarantee for one or more of their business lending products:

• OnDeck.

• iBusiness Funding.

• American Express.

• Fundbox.

Can I get a business loan with no personal guarantee?

Yes, but it’s not typical. To get a business loan with no personal guarantee, you’ll likely have to give the lender something else in return.

Here are some ways to avoid or limit a personal guarantee:

• Offer a larger down payment or collateral. Either one gives the lender more security, which may make it willing to waive or limit a guarantee. 

• Pay a higher interest rate. Your lender may drop or limit the personal guarantee if you agree to a higher rate.

• Negotiate a limited personal guarantee. If you have strong credit or business finances, you may be able to limit the scope of a personal guarantee by negotiating with lenders for non-SBA loans. 

» MORE: Business loans you can get without a personal guarantee

Things you might be able to negotiate

When negotiating with a lender to reduce your personal guarantee, here are some things you may be able to ask for:

• Excluding certain personal assets from the guarantee, like your house or retirement account.

• Capping your guarantee at a set dollar amount or a percentage of the loan balance.

• Ending the guarantee after a set number of on-time payments.

• Reducing the scope of the guarantee after your business hits key performance milestones.

• Delaying when the personal guarantee kicks in, such as only after a certain number of missed payments. 

Unsecured doesn’t mean no personal guarantee

An unsecured loan is not the same thing as not requiring a personal guarantee. These loans aren’t secured by physical collateral, like equipment or a building, so a lender will most likely require a personal guarantee or lien to help ensure repayment.

Consider personal guarantee insurance

If you’re worried about losing personal assets if your business goes under, you may be able to limit your exposure by buying personal guarantee insurance.

A policy can cover up to 80% of what you’d otherwise owe out of pocket if your lender enforces the guarantee. But you’ll have to pay an annual premium — typically 1% to 2% of your loan balance — and limitations and exclusions apply.

Personal guarantee insurance could be worth it if the amount you’d owe would wipe out your personal savings or force you to sell assets you and your family depend on. You could probably skip it if you could comfortably repay the loan yourself if the lender enforced the guarantee.

Should I sign a personal guarantee on a business loan?

Personal guarantees on business loans can be hard to avoid. But before signing one, make sure you consider the following:

• Are you confident your business will be able to repay the loan and abide by the other conditions of the loan? Review your business plan and financial statements to determine if the business can reliably make the payments. Even if the math looks good, remember that if the business makes the payments but violates the other conditions of the loan, the lender could still consider the business in default.

• Do you understand the terms of the personal guarantee? Be sure you know how much you could be liable for, how long you’d have to pay and whether the lender will come after certain assets you own first.

• Do you have the funds to repay the loan if the business defaults? Once you know the circumstances under which you’d be personally on the hook for the loan, ask yourself whether you could sustain a drop in your credit score and financial security if that day actually comes.

» MORE: What is a charge-off on an SBA loan?