Is It Possible To Get An Unsecured Business Loan Without A Personal Guarantee
July 21, 2022

Startups are often found neck-deep in obligations and managing liabilities in their early stages. Entrepreneurs put everything on the table to analyze and make crucial business decisions. The early stage is crucial for every startup, and everything requires perseverance and dedication, from meeting the capital requirements to building a reliable team.

Startups explore different funding options, like preparing their business plan to pitch to famous investors and venture capitalists.

However, seeking funding require exemplary dedication and a competitive pitch. It is why only a handful of startups qualify for funding through these ways.

Others look for immediate financial assistance from private lenders. Businesses lacking growth stats and tangible assets share vague opinions on a secured loan. Instead, they seek a less-risky and quick option to meet business priorities.

Private lenders provide unsecured business loans. It is ideal for new businesses seeking urgent money at minimal eligibility requirements. Most unsecured loans do not require a guarantee as the loan is named “UNSECURED,”- Which means collateral-free loan. However, some situations call for additional credibility over the loan.

The blog discusses the situations that call for a guarantee on an unsecured business loan.

What Does an Unsecured Business Loan Imply?

An unsecured business loan is specifically designed for businesses. Individuals cannot apply for these loans. These are collateral-free loans. These are ideal for startups and small businesses lacking credible business assets to put up as collateral.

In this, a business does not fear losing the asset. However, you may need to make a personal guarantee to borrow a large amount, and it acts as collateral or security in that case.

Personal Guarantee: Important Criteria in Unsecured Corporate Lending 

A personal guarantee is an individual’s promise to pay the remaining balance on the loan if the borrower fails to. Lenders demand it given low business finances and unclear business plans. Here the individual or the guarantor is generally the partner in the business.

A personal guarantee ensures reliability and improves the chances of qualifying for an unsecured loan. It is an agreement between the lender and guarantor, and the guarantor contractually agrees to repay the loan on the borrower’s behalf in case of default.

It is one of the requirements in unsecured business loans for new businesses. Hence, businesses must improvise with other prospects before applying for a loan.                        

How Does a Personal Guarantee Operate on a Business Loan? 

When a business signs off a personal guarantee. It agrees to repay the loan amount in whatever way possible. Personal guarantees in business are generally free from assets as collateral. The borrower or guarantor must pay the loan within the deadline. Lenders seek a guarantee on the loan because if a business defaults on a loan, it cannot claim any asset. Thus, a personal guarantee eliminates the risk factor on the lender’s part.

If the business defaults, the lender shares the right to sue the business and guarantor if they deny to pay back the loan. It is a threatening position for a guarantor. He may have to sell off his belongings to pay off debt if business assets don’t suffice.

While securing unsecured business loans for new businesses, always scan the terms and conditions. Talk these out with your guarantor and do everything you can to strengthen your business position.

A personal guarantee demands a business owner to pay a loan part. However, a guarantor is not liable to pay anything upfront or stake any personal asset. The agreement between the lender and the guarantor signifies – the amount the person must pay in case of default.

Under personal guarantee, the businesses may ask to reveal their SSN (Social Security Number) and EIN (Employee Identification Number) for further inquiry.

Who Can Be a Personal Guarantor on An Unsecured Business Loan?

Before applying for an unsecured business loan with a personal guarantor, you must know the eligibility criteria:

  • Spouse or partners holding shares in the business
  • Directors
  • CEOs

Is Personal Guarantee Always Required on The Loan?  

No, lenders do not ask for a personal guarantee every time. In opposition, a lender may demand more than one person’s guarantee if the loan amount is high and businesses lack a sound credit score and finances.

For example: If a business wishes to loan up to £4,000,000, that business cannot pay. Here guarantors become important. In this case, if there are 4 guarantors, the sum could be divided equally among these. In short, each will be paying £1,000,000 as loan repayment. If one person cannot pay the loan among these, the others must adjust the amount to repay. 

Thus, this is how a personal guarantee works on the loan.

Can You Get the Unsecured Business Loan Without a Personal Guarantee? 

Yes, in some cases, you can secure an unsecured loan without a personal guarantee. For this, you must have strong business finances. If your business balance sheet reveals a considerable improvement or potential, you may get a loan without a personal guarantee.

You can negotiate the personal guarantee undertaking that potential and the lender may reduce the personal guarantee amount or risk over the loan. In this, a tangible net worth of over £2,00,000 help a business promote this conversation further at a good level.

If your enterprise is a limited company and shares a good turnover of £2,00,000 or above, some lenders accept debentures or a part of the company’s assets to provide you with an unsecured loan.

How long does a personal guarantee last on a loan? 

A personal guarantee generally lasts as per the agreement terms and deadlines. The guarantee may also become unenforceable after a certain time. Initially, a lender may claim the payment in every way it can, and after a good time, a lender cannot claim it.

However, every personal guarantee shares unique loaning conditions and terms. The borrowers may find different terms with different borrowers. So, there is a vague possibility of non-claiming the dues. Thus, the borrower and guarantor need to go through the terms and improvise. It will help eliminate any surprises under unsecured business loans for new businesses.


If you own over 20% of your business and seek an unsecured business loan on bad credit, you may apply for the loan. Identify whether a personal guarantee is a right option for you or not.

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