Glossary

Personal guarantee

The owner’s promise to repay if the business cannot.

A personal guarantee makes the owner personally liable for the business’s obligation. It is standard in most small-business financing, including products marketed as "unsecured". Some advances use a narrower "performance guarantee" that is triggered by specific breaches (such as switching bank accounts to avoid debits) rather than by ordinary non-payment; read which kind you are signing.

How it appears in a contract

A guarantee section or separate document; note whether it is unlimited, joint and several across owners, and whether a spouse is asked to sign.

Worked example

If a $40,000 balance defaults and the business has no assets, an unlimited guarantee lets the creditor pursue the owner’s personal assets, subject to state law.

Illustrative figures on stated assumptions; not quotes.

What to ask

• Is this a full guarantee or a performance guarantee, and what triggers it?
• Is it capped?
• Does it survive a sale of the business?

Related terms

UCC-1 · Confession of judgment · Business purpose · all terms