A personal guarantee is a legally binding promise that makes you personally liable to repay a business loan if the company can't. On SBA 7(a) loans it is required from every owner of 20% or more of the borrower, so if the business defaults, the lender can pursue your personal assets, subject to law.
Who must guarantee
| Owner | Guarantee? |
|---|---|
| 20%+ owner | Full guarantee required |
| Owner's spouse (in some cases) | May need to sign |
| Seller retaining equity | Guarantee for ~2 years if keeping any stake |
Because a seller keeping even 1% must guarantee for about two years, many 2026 SBA deals require the seller to fully exit.
Why it matters when buying a business
The personal guarantee is what turns "the bank's money" into real personal risk, it's the reason underwriting the DSCR honestly matters so much. It also shapes deal structure: the seller-guarantee rule pushes many SBA 7(a) deals toward a clean, full change of ownership.
