Business Loans You Can Get Without a Personal Guarantee
Personal guarantees are typically required for small-business loans, but you may be able to forgo them in certain circumstances.
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Terms to know before you dive in:
Cosigner: an individual you trust to take over loan payments if you can’t make them.
Collateral: assets you’ll surrender to the lender if you fail to pay back your loan.
Default: repeatedly failing to make payments on your loan without coming to an agreement with your lender.
Secured business loan: financing backed by physical or non-physical assets (collateral).
Unsecured business loan: financing that doesn’t require collateral.
A personal guarantee on a business loan reduces a lender’s risk, and ensures that it won’t incur too much loss on the capital it’s lending out. Personal guarantees are a standard practice for most business loans; however, the requirement is ultimately up to the discretion of the lender.
As a borrower, signing a personal guarantee on a small-business loan can increase your likelihood of approval, or improve your interest rates and terms. Business loans you can get without a personal guarantee will depend on factors like your business finances, assets available for collateral, lender policy and business history.
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What is a personal guarantee on a business loan?
A personal guarantee is a document signed as a part of a business loan agreement promising that an individual borrower will repay the loan in the event that the business can’t. When you sign a personal guarantee, you are essentially acting as a cosigner on your business’s loan, which means that your personal assets may be seized if your business defaults on the loan.
Personal guarantees are common to most business loans — even unsecured business loans often require a borrower, or any owner of over 20% of the business, to sign a personal guarantee.
Lenders that don’t require a personal guarantee
| Product | Max loan amount | Min. credit score | Learn more |
|---|---|---|---|
 Triton Capital - Equipment financing NerdWallet Rating Apply now with Fundera by NerdWallet | $250,000 | 580 | Apply now with Fundera by NerdWallet |
 Giggle Finance - Merchant cash advance Apply now with Fundera by NerdWallet | $5,000 | 300 | Apply now with Fundera by NerdWallet |
 Fora Financial - Revenue advance Apply now with Fundera by NerdWallet | $1,500,000 | 570 | Apply now with Fundera by NerdWallet |
 Forward Financing - Merchant cash advance Apply now with Fundera by NerdWallet | $300,000 | 500 | Apply now with Fundera by NerdWallet |
 Wells Fargo Prime Line of Credit NerdWallet Rating | $1,000,000 | 680 | |
 Accion Opportunity Fund Small Business Working Capital Loan NerdWallet Rating | $250,000 | 600 |
Business loans you can get without a personal guarantee
Business loans that you can get without a personal guarantee normally require some other form of collateral to secure the loan; however, this requirement will vary based on the type of loan and the lender.
Term loans
Depending on the lender and your creditworthiness, term loans are one of the most affordable types of business loans, especially for large purchases. They provide a lump sum of capital upfront that is repaid over a set period of time, with interest.
While business term loans often require a personal guarantee, you may be able to negotiate, especially if you have strong personal or business collateral to offset the lender’s risk.
Lines of credit
Business lines of credit are revolving sources of capital that allow you to spend up to a certain limit, continue to draw on the line once you’ve repaid the amount borrowed and only pay interest on what you’ve drawn.
Similar to a term loan, a business line of credit without a personal guarantee will likely require another way of securing the line. For example, the Wells Fargo Prime Line of Credit does not require a personal guarantee, but is secured instead by a first position lien on business assets.
Equipment loans
Because equipment financing loans are inherently secured by the equipment being financed, you may have an easier time finding equipment lenders that don’t require personal guarantees.
Triton Capital, for example, is a California-based lender that provides term loans to finance equipment. It does not require a personal guarantee because the equipment being financed serves as collateral.
Merchant cash advances
Merchant cash advances (MCAs), or business payday loans, are not technically structured as loans, and may therefore be more likely than other types of business financing options to waive a personal guarantee requirement. Credibly, for example, is an alternative business lender that does not require a personal guarantee or collateral on its MCAs, and only files a Uniform Commercial Code (UCC) lien on deals over $200,000.
MCAs are not regulated the same way traditional business loans are, and are one of the most expensive and riskiest types of business financing. They are best used for short-term needs, and as a last resort.
Invoice financing or invoice factoring
Invoice financing is a type of small-business loan that uses your unpaid customer invoices as collateral. With invoice factoring, on the other hand, you actually sell your unpaid customer invoices to a third-party company, which then collects on the invoices.
Both types of lenders are usually more focused on the creditworthiness of your customers, and may therefore not require a personal guarantee; however, this is ultimately dependent on the lender.
Why do lenders require a personal guarantee?
A personal guarantee protects a lender and decreases their risk when lending to your business by allowing them to seize your personal assets in the event of a loan default, helping them recover some of their losses.
When you are willing to sign a personal guarantee, it also shows a lender that you are personally invested in the success of your business, and therefore, have an extra incentive to make your loan payments.
What are the consequences of signing a personal guarantee?
Simply signing a personal guarantee shouldn’t have any immediate consequences to your finances. The document doesn’t cause a business loan to appear on your personal credit report, or allow a lender to seize any personal assets without reason.
If your business is unable to pay the loan, however, a personal guarantee means that you are personally liable. This may mean covering the loan payments from your personal income, or handing over personal assets that can be used to pay off the loan amount. Lenders may report collection efforts to personal credit bureaus during this process, which can negatively impact your personal credit.
How can you avoid signing a personal guarantee?
Finding a business loan that doesn’t require a personal guarantee isn’t impossible, but it may require some negotiation. Since personal guarantees are used to protect lenders, you’ll need to find other ways to offset that risk.
Separate your business legal structure. Establishing your business as a separate legal entity is likely the first step in avoiding a personal guarantee. As opposed to a sole proprietorship, structuring your business as a corporation or LLC will allow you to build separate business credit, and demonstrate that your business’s cash flow, revenue and assets — and therefore, its ability to repay the loan — are independent of any personal contribution.
Establish business credit. Having strong, established business credit that demonstrates a positive history of repayment may offset some of the lender’s risk and show them that your business is likely to repay the loan. The catch is that to build your business credit, you’ll need a loan or a credit card that likely requires a personal guarantee. It’s important to make sure your business has a D-U-N-S number with Duns & Bradstreet, the most common business credit service, to make sure your business is building its credit profile.
Offer other high-value collateral. High-value business assets like real estate or large equipment is a great way to offset lender risk, especially if it’s worth more than your personal assets. Certain types of asset-based lending may automatically waive the personal guarantee requirement, but if not, it may be worth trying to negotiate with your lender if you have high-value collateral.
Other funding options that don’t require personal guarantees
Business credit cards. Business credit cards function similarly to personal credit cards, wherein you can spend up to a certain limit continually as you pay your balance, and are only charged interest on any unpaid balance you carry over from month to month. Many business credit cards do require personal guarantees but not all.
Like other financing options, business credit cards that don’t require personal guarantees have other requirements to offset the risk. Ramp’s corporate card, for example, requires a minimum of $75,000 in a business bank account, while the Sam’s Club Business Mastercard is available without a personal guarantee for businesses with $5 million in annual sales or revenue.
Crowdfunding. Crowdfunding is a way to raise capital through online platforms, where individuals can invest small amounts in your company in exchange for rewards or sometimes equity in your business. Crowdfunding can be a great way to avoid business debt, pledging assets as collateral and having to sign a personal guarantee.
Small-business grants. Small-business grants are another way to finance your business without signing a personal guarantee. Grants are available from local and federal government sources, nonprofit organizations or large corporations. Though they can take time and effort to research and apply for, they may pay off in the long run if you’re able to avoid going into business debt.
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