The LLC and the corporation exist to separate business debts from personal assets, and the personal guarantee is the document that pierces that separation on purpose. Banks, landlords, and suppliers extending credit to a small company almost always require the owner to sign one: if the company cannot pay, the owner will. It is the standard price of small business credit, and its wording decides whether a business failure costs the owner a capped sum or everything.
This template produces a complete commercial guarantee and makes the decisive choices explicit: unlimited or capped, continuing or specific, payment or collection, revocable or not, with the waiver and subordination language creditors expect.
What signing a personal guarantee actually means
A guarantee of payment, the commercial standard, means the creditor does not have to chase the business first: on default, they can demand payment from the guarantor immediately, sue them personally, and after judgment reach personal bank accounts, wages, and non-exempt assets, including in most states a lien on the family home. The entity shield is simply not in the picture, because the guarantor volunteered around it. The waivers in a standard guarantee (and in this one) close the escape routes guarantors historically argued: the creditor can give the borrower extensions, release collateral, or delay enforcement without releasing the guarantor. None of this makes guarantees improper: it makes them serious, which is why the cap, scope, and revocation terms deserve negotiation rather than a signature on autopilot.
- Guarantee of payment: creditor may come straight at the guarantor on default. Nearly universal in commercial practice.
- Guarantee of collection: creditor must exhaust the borrower first, judgment included. Rare, and lenders resist it.
- Joint guarantees: multiple owners usually sign jointly and severally: the creditor may collect 100% from any one of them, leaving contribution claims among the guarantors.
What guarantors can negotiate (and often win)
Guarantees are more negotiable than most owners assume, especially with landlords and suppliers. The cap is the first ask: a maximum dollar amount converts an open-ended personal risk into a known one, and "good guy" guarantees in commercial leases (the guarantor covers rent only until the tenant vacates and returns the keys) are a well-established compromise landlords accept. The scope is the second: a specific guarantee dies with the contract it names, while a continuing guarantee silently covers renewals, increased credit lines, and future advances for years; owners who sell their business routinely forget a continuing guarantee left behind, and it survives the sale unless released. Burn-down provisions (the cap shrinks as the loan amortizes or after clean payment years), revocation rights for future advances, and pro rata rather than joint liability among co-owners are all standard asks.
| Term | Guarantor-friendly | Creditor-standard |
|---|---|---|
| Amount | Capped, burning down over time | Unlimited, all obligations |
| Scope | Specific to one contract | Continuing, future advances included |
| Liability type | Collection, after borrower exhausted | Payment, direct on default |
| Among co-owners | Pro rata to ownership | Joint and several |
| Exit | Revocable for future obligations | Irrevocable until paid |
Enforcement, releases, and the limits creditors face
Enforcement follows a fixed path: default by the borrower, written demand on the guarantor, then suit on the guarantee, which is usually a fast case because the document waives most defenses. What survives as defenses: the debt was actually paid, the guarantee was released in writing, the signature was forged or procured by fraud, or (for specific guarantees) the creditor materially changed the underlying deal without consent. Creditors have compliance limits too: under federal Regulation B, a lender may not require a spouse to guarantee simply because they are married to the owner; spousal guarantees must be justified by the spouse's role or jointly relied-on assets. Guarantors who pay acquire subrogation rights against the borrower, though this form (like most commercial guarantees) defers those rights until the creditor is fully paid. And when the underlying business is sold or refinanced, the exiting guarantor's release must be obtained in writing: continuing guarantees do not expire from neglect.
Get a written release when you exit
Selling your interest in the company does not release your guarantee: the creditor's rights come from your signature, not your ownership. Every exit checklist should include written releases of every guarantee signed for the business, or an indemnity from the buyer at minimum.
State law shapes enforcement
Suretyship defenses, homestead exemptions, community property implications, and notarization practices vary by state, and guarantees of large obligations warrant independent legal advice before signing, a step some creditors require to be certified. This template is a self-help document, not legal advice.
Frequently asked questions
Does an LLC protect me if I signed a personal guarantee?
Not for the guaranteed debt. The LLC shield stops creditors of the company from reaching your personal assets, but a guarantee is your personal contract with the creditor: you volunteered the assets back in. The shield still works for company debts you did not guarantee.
What is the difference between a continuing and a specific guarantee?
A specific guarantee covers one contract as written and expires with it. A continuing guarantee covers the ongoing relationship: renewals, modifications, increased credit lines, and future advances, until revoked or released. Creditors prefer continuing; guarantors should know which one they are signing, and this form states it explicitly.
Can a personal guarantee be capped?
Yes, and negotiating a cap is the single most valuable concession a guarantor can win: a stated maximum dollar figure, sometimes burning down as the loan amortizes. This form supports unlimited or capped guarantees; enforcement costs typically sit on top of the cap.
Can I revoke a personal guarantee later?
Only as the guarantee allows. This form offers a revocation right for future obligations on 30 days' written notice, which stops new exposure but never erases liability for amounts already owed or committed. Irrevocable guarantees end only by payment in full or the creditor's written release.
Can a lender require my spouse to sign a guarantee?
Not merely for being your spouse: federal Regulation B prohibits requiring a spousal signature when the applicant qualifies independently. A spouse who co-owns the business or whose assets the lender legitimately relies on can be asked. Improperly required spousal guarantees have been successfully challenged.