Business loans
Why lenders ask for one, what it means for you, and what to check before you sign.
Business loans
Why lenders ask for one, what it means for you, and what to check before you sign.
The short answer
When you sign a personal guarantee, you promise to pay the business loan yourself if your business can’t.
Normally, a corporation’s debts belong to the corporation. A personal guarantee changes that for this one loan.
A small business may not have a long track record or many assets. A guarantee gives the lender comfort that the owners stand behind the loan.
It’s very common. Even government-backed loans allow it. On a CSBFP loan, for example, the lender can choose to take a personal guarantee.
| Kind | What it means |
|---|---|
| Unlimited | You could owe the full amount of the loan, plus interest and costs. |
| Limited | You only owe up to a set amount or share. |
| Unsecured | Your promise alone, not tied to a specific asset. |
| Secured | Backed by something you own, like your home. |
Always have a lawyer read it before you sign.
We help you compare offers, including the guarantee terms. Tell us what you need.
Many lenders ask for one from owners of small businesses. Sometimes you can limit it or offer business assets instead.
It depends on the guarantee. If it is secured by your home, or the lender gets a court judgment, your home could be at risk. Have a lawyer explain your guarantee.
Sometimes. Ask the lender if it can be reduced or removed once the loan is smaller or your business is stronger.
No. Collateral is an asset that backs the loan. A personal guarantee is your promise to pay. Some loans have both.
Keep reading
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3 min readHow to get a startup business loan in Canada: what lenders want from new businesses, the best options like CSBFP and Futurpreneur, and simple steps to apply.
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