Personal Guarantee Basics
Lenders always evaluate borrowers to predict whether or not they'll repay. For consumer loans, there are credit scores and a wealth of other information to help with the decision. However, businesses - especially new businesses - may not have a credit history.
Without a personal guarantee, many small businesses can’t get loans. Lenders will wonder why they should take a risk if you’re not willing to put skin in the game.
What's the Risk?
When you provide a personal guarantee, you allow a lender to go after your personal assets if you can’t repay a business loan. The business may be incorporated to limit your liability, but that protection doesn’t help with a personal guarantee.
If you’re considering a personal guarantee, learn more about the risks: