Personal guarantee

Definition

Your promise to repay the loan personally if the business cannot.

Why It Matters

It is the emotional threshold of self-funded search, and a legal one: sign it and the house and savings are, in a real sense, in the deal. Every owner of 20% or more signs, so it cannot be structured away, which is why the default-rate data reads as careers, not statistics, and why the business you pick matters more than any clause. The spouse question has a published answer too, and it counts more people than a couple. A spouse owning less than 20% still guarantees the loan in full, once the combined interest of both spouses and any minor children reaches 20%. Splitting ownership across a household does not get anyone out of it, and neither does a trust: a trust holding 20% or more guarantees in full, and the person who set it up guarantees personally too. A spouse who owns nothing signs the collateral documents and, where jointly held collateral is pledged, a guaranty limited to their own interest in it, which is how the family house enters the file. In California, a community property state, that interest is half of what the couple acquired during the marriage, and what either spouse owned before marrying, or was given or inherited, stays separate.

In numbers: On a $900,000 7(a) loan, every owner of 20% or more signs personally: if the business fails owing $600,000 after liquidation, that balance follows the guarantors' houses and savings, which is why the charge-off data reads as careers, not statistics.