A personal guarantee means you personally promise to pay back a business loan in the event your business is unable to cover repayment of the loan. If your business defaults, the lender can come after your personal assets and real estate. Lenders need to analyze your ability to repay the loan, and most small businesses do not have credit history. In this case, they look to your personal credit score to evaluate your business’s creditworthiness. Typically, anyone who owns at least 20% of the business is required to sign a personal guarantee. For many conventional loans it is not uncommon for a spouse to have to sign as well.

The Pros and Cons of a Personal Guarantee

The pros of a personal guarantee is that the lender is more likely to lend you the money, and often at a better rate. It also shows that you are willing to put your own assets on the line. It is risky for the lender to not have a personal guarantee since a certain percentage of small businesses fail in the first year.

Which leads to the con of a personal guarantee of personally taking responsibility for the loan payments if the business fails. You could lose your home and savings depending on the size of the loan. If you are unable to make the payments, then the lender can take legal action against you which will make it difficult to borrow money in the future.

How To Get Started?

Simple Commercial Capital is here to help you navigate all of the commercial loan options available. Look through the loan programs found at the top of our page. Each program has a brief description and loan parameters. If one of the loan programs fits your needs click the Apply Now button to start the application process or call us at 1-866-554-1120 to discuss your options in more detail. Our goal is to make this process as simple as possible for you.