- 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.
Frequently asked
Does a personal guarantee mean I'm risking my personal assets? +
Yes. If the business can't repay, the lender can pursue you personally for the balance — which may include personal savings or other assets, depending on the guarantee and applicable law. It effectively sets aside the liability protection a business entity normally provides.
What's the difference between a limited and unlimited personal guarantee? +
An unlimited guarantee makes you responsible for the entire outstanding balance plus collection costs. A limited guarantee caps your exposure to a set amount or percentage, which is common when several owners each guarantee a portion.
Can I get a business loan without a personal guarantee? +
Sometimes, but it's uncommon for small businesses. Lenders often require one to align the owner's incentives with repayment. Established businesses with strong revenue, credit, or collateral have the best odds of avoiding it.
Last updated: June 2026