A personal guarantee is a promise made by a person or an organization to accept responsibility for another party's debt if the debtor fails to pay it.
Personal guarantees are most common in small business lending. When a company has little credit history or limited collateral, lenders and card issuers often ask its owners to guarantee business loans, leases, or corporate credit cards personally. The guarantor becomes liable alongside the company, so the creditor can pursue the guarantor's personal assets if the business cannot or will not pay, and the obligation generally survives even if the business declares bankruptcy.
A personal guarantee shifts risk from the lender to the business owner and can strengthen an application that falls near the edge of a lender's 📝Credit Box. Some asset-based lenders, which rely primarily on inventory and receivables as collateral, do not require guarantees as a rule but may ask for one in particular cases.