The Personal Guarantee, Explained

A personal guarantee (PG) makes you, the owner, personally responsible if the business cannot pay. Most small-business credit products require one until the business is strong enough to borrow on its own.

Why it matters

A PG quietly erases the wall between business and personal. Signing one without noticing is how a business problem becomes a family problem; reading for it is a survival skill.

Key facts

• Most business credit cards and many loans for young businesses require a PG, regardless of LLC status.
• Under a PG, the lender can pursue your personal assets if the business defaults.
• Some products advertise no-PG terms, usually for established companies with strong business files and revenue.
• SBA loans generally require guarantees from every owner of 20% or more.
• A PG is negotiable far less often than it is unread; read every application for the guarantee clause.

In practice

1. Search every credit application for guarantee language before signing.
2. Track which of your business debts carry a PG in one list; that is your true personal exposure.
3. Build the business file and revenue until no-PG products open up, then migrate.