Personal guarantees

Lenders often require that loans be personally guaranteed. This means that if your business income isn't sufficient, you will use your personal assets to repay the debt.

Sole proprietors and partnerships automatically personally guarantee debt, because their business entity does not separate business from personal assets. So personal guarantees only become significant if you have formed an limited liability company or a corporation.

If you want to avoid personally guaranteeing debt, you will probably be asked to pledge another source of collateral to repay debt.