General
Is a personal guarantee required for a business loan?
Short Answer
Yes, for nearly all commercial loans under $5M. Any owner with 20% or more equity must personally guarantee an SBA loan. Inflection Financing conventional loans also require PG.
Detail
A personal guarantee makes the principal personally liable for the debt if the business cannot pay. SBA requires PG from any owner with 20%+ equity. Conventional lenders almost universally require PG for loans under $5M. The PG is not collateral — it does not pledge specific assets — but it does allow the lender to pursue personal recovery if the business defaults. The only way to avoid PG is to qualify for asset-based, non-recourse, or large CRE financing — typically only available at $10M+ deal sizes.
Key facts
- SBA: PG required for 20%+ owners
- Conventional under $5M: PG nearly always required
- Non-recourse CRE: typically $10M+ only
- PG is unsecured personal liability, not pledged collateral
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