What is a personal guarantee on a business loan?

A personal guarantee is a legal commitment by a business owner to personally repay a business loan if the business cannot. By signing a personal guarantee, your personal assets — home, savings, investments — become at risk if the business defaults. SBA loans always require a personal guarantee from anyone owning 20% or more of the business. Most small business loans require personal guarantees because most small businesses lack the track record or assets to stand alone. An unlimited personal guarantee covers the full loan amount; a limited guarantee caps personal liability at a defined amount. Seek legal counsel before signing any personal guarantee.