When you sign a personal guarantee for a business loan, you are bringing liability to all assets of your personal life. While every new business owner feels optimistic about the future of their business, signing a personal guarantee is dangerous because you risk losing assets like your house if your business runs into problems.
A personal guarantee often seems like an easy way to secure a loan for a new business, however there are many risks involved. A personal guarantee is similar to cosigning a loan, meaning not only will your business be responsible for the loan, but if it encounters problems and cannot pay back the loan your personal assets may be liable. There are almost always risks involved when a loan is taken out, however a personal guarantee, while still an option, should be treated as a last resort for securing a loan. There are other ways to secure a loan that offer more protections for person assets that are available to try before relying on a personal guarantee.