# Personal Guarantee

> A personal guarantee is a promise that makes a business owner personally responsible for repaying a loan if the business defaults, allowing the lender to pursue the owner's personal assets to recover the debt.

## Key takeaways
- A personal guarantee makes a business owner personally responsible for repaying a loan if the business defaults, letting the lender pursue your personal assets.
- An unlimited guarantee covers the full balance plus collection costs, while a limited guarantee caps your exposure to a set amount or percentage.
- Most small-business financing requires one, and a default can affect your personal credit, so read the scope before you sign.

## How a personal guarantee works

A **personal guarantee** is a legal commitment in which a business owner agrees
to repay a loan personally if the business cannot. Even when you borrow through
an LLC or corporation, a personal guarantee lets the lender look past that entity
and pursue **your personal assets** to recover the debt. Lenders use it to reduce
their risk and to keep owners motivated to repay.

### Limited vs. unlimited

- An **unlimited personal guarantee** holds you responsible for the full balance,
  often including interest and collection costs.
- A **limited personal guarantee** caps your liability — by dollar amount or
  percentage — and is common when multiple owners each guarantee a share.

### A concrete example

Suppose your LLC borrows **$80,000** and later defaults with **$40,000** still
owed. With a personal guarantee, the lender can come after you personally for
that **$40,000**, potentially reaching personal accounts or assets even though
the loan was in the business's name.

### What to watch for

- **Read the scope.** Know whether the guarantee is limited or unlimited and
  exactly which obligations it covers.
- **Joint and several liability.** With multiple guarantors, you could be on the
  hook for the entire balance — not just your share.
- **It can affect personal credit.** A default or collection action may show up
  on your personal credit, not just the business's.

Most small-business financing involves a personal guarantee. Hoss Capital can
help you understand the terms before you sign and weigh products with different
guarantee and collateral requirements.

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