Do I need a personal guarantee for a business loan?
For most unsecured or lightly secured business loans, yes, a director’s personal guarantee is standard. It means you agree to personally cover the debt if the business can’t, which gives the lender comfort beyond the business itself. Larger, well secured facilities sometimes need less of one, or a guarantee capped at a portion of the loan. It’s a normal part of commercial lending, not a sign the lender doubts your business.
What a personal guarantee actually covers
A personal guarantee is a promise from a director or owner that if the business defaults, they’ll personally cover what’s owed. Lenders usually ask for it from anyone with meaningful control of the business, not just the primary applicant. Some guarantees are unlimited and cover the full debt. Others are limited to a set dollar figure or a percentage of the facility. The terms are set out in the loan documents and worth reading properly rather than skimming, since this is the one clause that follows you personally if things go wrong.
When a lender asks for less
Strong security, like a registered mortgage over commercial property, can reduce or sometimes remove the need for a personal guarantee, because the lender already has an asset to fall back on. Larger, more established businesses with strong financials occasionally negotiate a capped or limited guarantee rather than an unlimited one. This varies a lot by lender and by deal, so it’s worth asking the question directly rather than assuming either way. A broker who knows the panel of lenders can usually tell you upfront which ones are more flexible on this point.
Not sure where you sit?
Tell us what you need the money for and we’ll give you a straight read on what’s actually available to you.
Last updated 15th July 2026. Reviewed by Authorised Credit Representative 554584 of Australian Credit Licence 414426.