A signed promise by an individual, usually an owner, to repay a business or real estate loan personally if the borrowing company does not.
A personal guaranty makes an individual answerable for a company’s loan. If the company stops paying, the lender can pursue the guarantor’s own income and assets under the terms of the document.
The FDIC’s examination manual sets out the main types. A guaranty of payment means the guarantor pays when the loan is not paid on time, without the lender first going after anyone else. A guaranty of collection means the guarantor pays only after the lender has won a judgment against the borrower and failed to collect. A limited guaranty covers a specific note or a fixed period; a continuing guaranty is a separate document that also covers future dealings between the lender and the borrower until it is revoked.
On SBA loans the terms are set by rule: anyone who owns 20 percent or more of the borrower gives an unlimited full guaranty, and each guarantor provides a personal financial statement dated within 90 days. A spouse who owns less than 20 percent must also sign when the couple’s combined stake reaches 20 percent.
Before signing, check whether the guaranty is capped, whether it is joint with other owners, and whether it ends when the loan is repaid.
How it shows up in the data here
Not in any public file. No filing here says whether a lender took a personal guaranty on any loan, and no borrower or guarantor is named on this site. Banks and credit unions usually ask for one on small business and smaller property loans. Use loan comps to find lenders active at your size, then ask each one what guaranty it wants.
Go further
- Loan comps: Lenders that made loans like yours, by size and place.
- When a bank says no: What to do next if the guaranty terms end a deal.
- Guarantor strength and recourse, explained: A guaranty is the lender's second way out. Whether you sign one, how much it covers and what the lender checks before accepting it shape a commercial loan as much as the rate does.
- Global cash flow, explained step by step: A property can cover its loan while the people behind it cannot cover their other debts. Global cash flow is the test that looks at all of it at once.
Related terms
- Guarantor: A person or company that promises to repay a loan if the borrower does not. On a loan to an LLC or corporation, the guarantor is usually an owner.
- Recourse: A lender's right to collect a loan from the borrower or guarantor personally, beyond the property or other collateral pledged for it.
- Non-recourse loan: A loan the lender can collect only from the property pledged for it, not from the guarantor personally, except for listed bad acts.
- Carve-out guaranty: A guaranty on a non-recourse loan that makes the guarantor personally liable only if the borrower commits listed acts, such as fraud or a voluntary bankruptcy.
- SBA Form 413 (Personal Financial Statement): SBA's personal financial statement. Each 20 percent owner and each guarantor except a supplemental guarantor gives one, or the lender's own equivalent, signed and dated within 90 days.
- Contingent liability: A debt a person or company would owe only if something happens, most often a guaranty of someone else's loan that the borrower then stops paying.
- Global cash flow: The combined cash flow of a borrower, its owners and their other businesses, set against all of the debt payments those same parties owe.
- SBA collateral requirements (7(a)): SBA's rules for what a 7(a) lender must take as collateral and how each asset counts, such as improved real estate at 85 percent of value. A request must not be declined only for thin collateral.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.