Personal guarantee

A personal guarantee is a commitment by a business owner, as an individual, to repay a business obligation if the business does not. Lenders, funders, equipment lessors, sureties and sometimes suppliers require one, especially from smaller companies, because the business entity alone may not have enough assets to secure the obligation.

A guarantee puts the owner's personal assets behind the business debt and typically survives the sale of the business or the owner's departure unless it is formally released. Read whether the guarantee is limited to a stated amount or unlimited, whether it covers future obligations as well as the current one, and how it can be terminated. It is one of the terms most worth negotiating.