Quick answer: A business lender may lend to the company but still require directors or owners to guarantee repayment. The guarantee is a separate legal promise and can create personal exposure if the company cannot repay. Read the scope, any cap, recovery costs and supporting security, and obtain legal advice before signing a material guarantee.
Questions business owners commonly ask
- Why did I set up a company if the bank still wants me personally on the hook?
- If the business fails, can the lender pursue me under the guarantee?
- Is every director guarantee unlimited?
Company borrower and guarantor are different roles
The company owes the facility. A guarantor promises to meet specified obligations if the borrower does not. That distinction matters: limited liability does not protect you from obligations you personally sign. For a material facility, obtain the actual guarantee and security documents rather than relying on a sales summary.
Read the scope, not just the signature page
Check whether the guarantee is capped or unlimited, limited to one facility or drafted as an all-monies obligation, and whether enforcement costs and interest are included. Also identify whether a residential mortgage, GSA or other security sits behind the guarantee.
Unsecured business loan can still have a guarantee
In SME lending, 'unsecured' commonly means no mortgage over real property or no specific asset collateral. It does not necessarily mean the directors have no personal guarantee exposure.
Compare security packages, not only rates
A cheaper loan can carry a materially broader security package. If the lender wants a property mortgage, GSA and unlimited guarantees for a modest working-capital need, compare credible alternatives before accepting that structure.
Related guides
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General information only. Business lending policy, security, guarantees, pricing, covenants and documentation vary by lender and transaction. This is not legal, tax or accounting advice.
Frequently asked questions
Does a company protect me from a guaranteed business loan?
Not from obligations you personally guarantee.
Can a guarantee be capped?
Some guarantees are limited; the specific document controls.
Does unsecured mean no guarantee?
No.
Are guarantor protections the same for every lender?
No. The Banking Code applies to subscribing banks and covered circumstances; other lenders may have different frameworks.
Should I get legal advice?
Yes for material or broad guarantees.
Sources and verification
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