Personal Guarantee
A personal guarantee on a business loan is a legal commitment by an individual — typically a business owner or principal — to repay the loan personally if the business is unable to do so. It acts as an extra layer of assurance for lenders, making the individual liable for the debt beyond the business itself.
There are two types of personal guarantees:
Unlimited: The individual is liable for the full amount of the loan, including any legal fees the lender incurs while trying to collect it.
Limited: The personal guarantee is limited to a specific amount or a percentage of the loan.
Lenders often require personal guarantees from small businesses or startups, as these entities may not have substantial credit history or assets.
A personal guarantee can enable access to funding when a business’s financial profile alone may not qualify. However, it increases the personal financial risk of the guarantor, so it’s important to carefully assess the risk before agreeing.
Financial Glossary
Use Lighter Capital's glossary to understand common terms used in finance and investing, so you can build financial literacy and make informed decisions for your startup.
Personal Guarantee
A personal guarantee on a business loan is a legal commitment by an individual — typically a business owner or principal — to repay the loan personally if the business is unable to do so. It acts as an extra layer of assurance for lenders, making the individual liable for the debt beyond the business itself.
There are two types of personal guarantees:
Unlimited: The individual is liable for the full amount of the loan, including any legal fees the lender incurs while trying to collect it.
Limited: The personal guarantee is limited to a specific amount or a percentage of the loan.
Lenders often require personal guarantees from small businesses or startups, as these entities may not have substantial credit history or assets.
A personal guarantee can enable access to funding when a business’s financial profile alone may not qualify. However, it increases the personal financial risk of the guarantor, so it’s important to carefully assess the risk before agreeing.
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Lighter Capital's non-dilutive financing provides startups with a quick upfront injection of growth capital based on the business's recurring revenue streams. That means you get to keep your equity and control of the business, and your loan payments are right-sized to what the business can support. Our financing also scales with you as you grow. Apply online to find out how much you may qualify for.
