What Is a Personal Guarantee?
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
What Is a Personal Guarantee?
Limited vs Unlimited Personal Guarantees
Why Do Lenders Ask for Personal Guarantees?
Types of Business Financing That Require a Personal Guarantee
SBA loans. SBA loans may require an unlimited personal guarantee for any individual owning 20% or more of the business applying for a loan. That also means your personal credit score is reviewed as part of the loan application. There are multiple types of SBA loans, so you can explore all options and determine which financing solution is best suited for your needs. Short-term business loans. There are many different types of short-term business loans, some of which may require a personal guarantee. These loans are typically used to help with cash flow issues or emergency expenses. You can often apply online and get quick funding if you qualify. Term loans are likely to be secured by a guarantee, so check your offer carefully. Long-term business loans. These loans typically last anywhere between three and 10 years, or even longer if your business is making a major capital investment like real estate. Depending on the situation, you may be able to use business assets (like equipment or property) as collateral for long-term business loans. But personal credit may also be considered as part of the loan application and a personal guarantee or blanket lien on the business could be a stipulation to qualify.
Benefits of Personal Guarantees
Risks of Personal Guarantees
How Does a Personal Guarantee Affect Your Finances?
Alternatives to a Personal Guarantee
The Takeaway
About the Author
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