Can I remove a personal guarantee once my business is established?

Sometimes, depending on the lender and how the business’s own credit history has developed. As a business builds its own track record, some lenders may be willing to renegotiate terms without requiring a personal guarantee, though this isn’t guaranteed.

Does a personal guarantee affect my personal credit score?

It can, particularly if the business misses payments, since some personal guarantee arrangements are reported to personal credit bureaus. Understanding whether this applies to a specific agreement is worth confirming before signing.

Are there business credit cards that don’t require a personal guarantee?

Yes, some providers offer options specifically without this requirement, though they often come with their own qualifying criteria, such as a minimum business revenue or existing business credit history. Researching these options is worthwhile if avoiding personal exposure is a priority.

Does having no U.S. business credit history make a personal guarantee more likely?

Almost always, at least for a first round of financing. A lender evaluating a business with no credit file of its own has essentially nothing to assess risk against beyond the owner’s personal financial standing, which is exactly what a personal guarantee is designed to provide. Building a business credit history over time, through consistent on-time payments on whatever credit the business can access, tends to reduce reliance on a personal guarantee for later financing.

What happens to a personal guarantee if I sell my business?

This depends entirely on the specific agreement and the terms of the sale. A personal guarantee doesn’t automatically transfer to a new owner just because the business changes hands, so a departing owner typically needs to formally request release from the guarantee, and a lender isn’t obligated to grant it simply because ownership has changed. Confirming this specifically as part of any sale negotiation, rather than assuming the guarantee ends automatically, avoids remaining personally exposed to a business that’s no longer owned.

Back to Glossary

Personal guarantee: when your business debt becomes your own

Key takeaways
- A personal guarantee makes you personally responsible for a business debt if the business itself can’t repay it.
- It’s commonly required for small business loans and some business credit cards, particularly for newer businesses.
- Signing one means personal assets, not just business assets, can be pursued if the debt goes unpaid.
- Some business credit card options exist specifically without a personal guarantee requirement.
- Understanding what you’re personally exposed to before signing protects your broader financial stability.

A personal guarantee makes you personally responsible for a business debt if the business can’t repay it. Here’s what that means, and whether alternatives exist.

What is a personal guarantee?

A personal guarantee is an agreement in which a business owner personally commits to repaying a business debt if the business itself is unable to. This is common for small business loans, lines of credit, and some business credit cards, particularly for newer businesses without an extensive credit history of their own. The concept is closely related to being a guarantor⁠(opens in new window) more generally, though a personal guarantee specifically refers to this arrangement in a business lending context, rather than a personal loan or lease. In both cases, the underlying idea is the same: someone is pledging their own financial standing to back an obligation that isn’t technically their own.

Why personal guarantees matter for small business owners

Business debt is normally the responsibility of the business entity itself, which is one reason many people form a business structure like an LLC in the first place. A personal guarantee overrides that separation for the specific debt involved:

Personal assets become exposed. If the business defaults, a lender with a personal guarantee can pursue personal assets, not just the business’s, to recover the debt.
It’s commonly required for newer businesses. Lenders often ask for a personal guarantee specifically because a new business lacks its own established credit history.
Ownership stake can determine who has to sign. For most SBA loans, any owner with a 20% or greater stake⁠(opens in new window) in the business is generally required to provide an unlimited personal guarantee, while owners below that threshold may not be required to sign one at all, depending on the lender. This threshold isn’t unique to SBA lending either; many conventional business lenders apply a similar ownership-based rule when deciding who among multiple business partners needs to personally guarantee a loan.
Not every personal guarantee is unlimited. Some agreements are structured as a limited guarantee instead, capping the dollar amount, time period, or percentage of the debt a specific owner is exposed to, rather than the full balance indefinitely. This distinction is often negotiable even when eliminating a personal guarantee entirely isn’t.

What personal guarantees mean for immigrant entrepreneurs

For immigrant entrepreneurs building a new business without an established U.S. business credit history, a personal guarantee is often unavoidable for initial financing, since lenders have little else to assess. This mirrors the personal side of building credit history⁠(opens in new window) from scratch: a business, like an individual, has no track record to point to until one is built, and a personal guarantee is often how a lender bridges that gap in the meantime.

Some business credit card options⁠(opens in new window) exist without a personal guarantee requirement, though they often come with their own qualifying requirements, such as a minimum business revenue or an already-established business credit history, which can put them out of reach for a genuinely new business. Understanding the real scope of the personal exposure before signing, rather than treating it as routine paperwork, protects personal financial stability if the business faces a setback.

First steps before agreeing to a personal guarantee

Reading the specific terms carefully, including whether the guarantee is limited or unlimited, clarifies exactly which debts and how much personal exposure is involved.
Asking whether an alternative without a personal guarantee exists, particularly for business credit cards, is worth doing, since some providers now offer this option.
Asking specifically about a limited guarantee, if an unlimited one is the default offer, is worth trying even when eliminating the requirement entirely isn’t possible.
Weighing personal financial capacity to cover the debt, not just the business’s projected ability to repay, gives a more honest picture before signing.

Common questions about personal guarantees

Can I remove a personal guarantee once my business is established?

Sometimes, depending on the lender and how the business’s own credit history has developed. As a business builds its own track record, some lenders may be willing to renegotiate terms without requiring a personal guarantee, though this isn’t guaranteed.
Does a personal guarantee affect my personal credit score?

It can, particularly if the business misses payments, since some personal guarantee arrangements are reported to personal credit bureaus. Understanding whether this applies to a specific agreement is worth confirming before signing.
Are there business credit cards that don’t require a personal guarantee?

Yes, some providers offer options specifically without this requirement, though they often come with their own qualifying criteria, such as a minimum business revenue or existing business credit history. Researching these options is worthwhile if avoiding personal exposure is a priority.
Does having no U.S. business credit history make a personal guarantee more likely?

Almost always, at least for a first round of financing. A lender evaluating a business with no credit file of its own has essentially nothing to assess risk against beyond the owner’s personal financial standing, which is exactly what a personal guarantee is designed to provide. Building a business credit history over time, through consistent on-time payments on whatever credit the business can access, tends to reduce reliance on a personal guarantee for later financing.
What happens to a personal guarantee if I sell my business?

This depends entirely on the specific agreement and the terms of the sale. A personal guarantee doesn’t automatically transfer to a new owner just because the business changes hands, so a departing owner typically needs to formally request release from the guarantee, and a lender isn’t obligated to grant it simply because ownership has changed. Confirming this specifically as part of any sale negotiation, rather than assuming the guarantee ends automatically, avoids remaining personally exposed to a business that’s no longer owned.

In Summary

A personal guarantee turns a business debt into a personal one if things don’t go as planned, and understanding this real exposure before signing is essential, especially for immigrant entrepreneurs whose new businesses often can’t yet qualify for financing without one. Exploring alternatives where they exist, and understanding the specific terms fully otherwise, protects broader financial stability. Understand your options fully before agreeing to a personal guarantee for your business.

This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant, or otherwise guarantee that the content is accurate, complete, or up to date.