A personal guarantee is your promise that if the business can’t repay the loan, you will, from your own money and assets. Even if your business is an LLC or a corporation, a guarantee makes you personally responsible for that debt.
Who signs on SBA loans
- Owners with 20% or more of the business generally must sign an unlimited personal guarantee.
- Lenders can ask others to guarantee too, such as owners with smaller shares or key managers.
- Spouses may be asked to sign certain documents, especially when jointly owned property is pledged.
Types of guarantees
| Type | What it means |
|---|---|
| Unlimited | You’re responsible for the full loan balance, interest and collection costs |
| Limited | Capped at an amount, a percentage or specific collateral |
| Joint and several | With several guarantors, the lender can collect the full amount from any one of them |
What happens in a default
The lender (or the SBA, after paying the guarantee) can pursue the guarantors: collecting from personal assets, placing liens, and, for federal debt, offsetting tax refunds and certain payments. Your personal credit can be damaged.
How to protect yourself
- Borrow only what the business can comfortably repay. Run your numbers in our calculator.
- Read the guarantee before closing; ask what it covers and whether it is limited.
- Know which personal assets are pledged as collateral, separate from the guarantee.
- Talk to an attorney about your state’s laws on homestead and other protections (Florida has strong homestead protections, but they have limits).
- Communicate early with the lender if you see trouble coming. Workouts are easier before payments are missed.
See also collateral without a home and what the SBA guarantee means.
Frequently asked questions
Who must sign a personal guarantee on an SBA loan?
Owners with 20% or more of the business generally must sign an unlimited personal guarantee.
Does an LLC protect me if I signed a personal guarantee?
Not for that debt. The guarantee makes you personally responsible even if the business is an LLC or corporation.
What is a joint and several guarantee?
When there are several guarantors, the lender can collect the full amount from any one of them.
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Educational information, not legal or financial advice. We are not a lender and are not affiliated with the SBA. Disclaimer