A personal guarantee is a commitment by an individual — typically a business owner — to be personally responsible for a debt or obligation if the business fails to perform. It is one of the most significant documents a business owner can sign, because it bridges the gap between business liability and personal liability that the corporate structure was designed to create. When you sign a personal guarantee, a lender, landlord, or counterparty gains the ability to come after your personal assets — not just the assets of the business — if the obligation is not met.

Personal guarantees are common in commercial lending, commercial leases, and in some business transactions where the buyer is acquiring a business with seller financing. Lenders routinely require them from owners of small businesses that cannot qualify for credit solely on the strength of the business’s balance sheet. Landlords require them when a business tenant does not have an established credit history. In a business sale, a seller providing financing to a buyer may require a personal guarantee as part of the deal structure.

Understanding what you are signing matters. Not all personal guarantees are the same. A limited guarantee caps the guarantor’s personal exposure at a specific amount or time period. An unlimited guarantee exposes the guarantor to the full obligation with no ceiling. Some guarantees include carve-outs that reduce personal exposure under certain conditions. Spousal signature requirements, waiver of defenses clauses, and confession of judgment provisions are all terms that can appear in guarantee documents and that carry meaningful consequences. A transactional attorney reviewing a personal guarantee can help you understand exactly what you are committing to, identify terms that may be negotiable, and make sure you are not signing something broader than the situation actually requires.