When applying for a business line of credit (LOC), a personal guarantee helps mitigate the lender’s risk but puts the business owner in a more precarious position. However, you can still get funding for your business without a personal guarantee if your business meets alternative eligibility requirements.
Compare business lines of credit with no personal guarantee
These lenders offer LOCs and may not require a personal guarantee, but you’ll need to meet other criteria.
Lender
Loan amounts
Loan terms
Basic requirements
Lendzi
$2,000 to $250,000
6 to 36 months
6 months in business, $50K+ in annual revenue, credit score requirements vary
A personal guarantee on a business loan means you’re personally responsible for repaying the debt if your company can’t. If your business defaults, the lender can require you to pay and may pursue your personal assets, like your house or car, if you don’t.
Lenders may require either a limited or unlimited personal guarantee. An unlimited guarantee holds you responsible for the entire debt, while a limited guarantee only covers a portion of the debt.
Sole business owners often sign an unlimited guarantee, meaning if you took out a $50,000 loan, you’d be required to repay it all, including interest and fees. Partners might each sign limited guarantees, sharing responsibility for the debt.
Pros of getting a business line of credit with no personal guarantee
Obtain funding for your business
No risk to personal assets
Only have to pay interest on funds used
Helps build business credit
Cons of getting a business line of credit with no personal guarantee
May require collateral
Potentially higher rates
May need a business credit score
Potentially smaller credit limits
Why are personal guarantees sometimes required?
A personal guarantee is typically required if you haven’t established business credit or don’t have strong financials. While it can be tough to qualify for a business line of credit without one, it’s not impossible, but expect stricter requirements that vary by lender.
Expert insight: Requirements depend heavily on the lender.
"It really depends on the lender.
Some will ask for collateral, while others won’t. If you don’t have collateral, most lenders will want you to have been in business for a couple of years, show good cash flow management and have a decent personal credit score — usually around 650 or higher. The better your score, the better your chances."
Joseph Camberato
CEO, National Business Capital
Expert insight: Business credit can help you avoid a personal guarantee.
"Having established business credit is important. Lenders use your company credit profile to determine your trustworthiness in the absence of a personal guarantee. This includes a positive payment history with vendors, suppliers and other creditors."
Michael Baynes
cofounder and CEO, Clarify Capital
Expert insight: You may qualify without a PG (personal guarantee), business credit or collateral — but expect worse terms.
"Although uncommon, it is conceivable.
Some lenders provide unsecured business lines of credit based on the overall viability of the company. These often offer higher interest rates and smaller credit limits."
Michael Baynes
cofounder and CEO, Clarify Capital
Consequences of signing a personal guarantee
A personal guarantee might help you secure the funding necessary to keep your business running, but it could put your individual finances at risk, especially if the business fails. Here are a few of the biggest consequences you’ll face if that occurs:
You’re personally on the hook for repayment. If your business fails to repay the loan, you’re legally obligated to repay the debt from your personal finances, even if your business is an LLC or corporation.
Lenders can go after your personal assets. Your personal assets are at risk if you default on the business loan, including your vehicles, savings account, investments and even your home, depending on the laws in your state and the terms of the guarantee.
Your personal credit score could be affected. Your lender could report missed payments or loan default to the major credit bureaus, which lowers your credit score and makes it harder to borrow money in the future.
The lender could take legal action. If you fail to make payments on the loan, the lender could sue you personally.
It could strain your personal finances. If your business struggles, you may have to cover payments out of pocket by tapping into savings, using personal credit or cutting back on household expenses to stay afloat.
It might impact cosigners or spouses. Some lenders require spousal consent for a personal guarantee, meaning your spouse’s finances could be affected, too.
How to avoid signing a personal guarantee
When you consider how much damage a personal guarantee could do to your personal finances, it makes sense to look for ways around it. While not all lenders are willing to budge on personal guarantees, these strategies can improve your chances of getting approved without one.
Build strong business credit. Having a solid business credit profile shows lenders your company is trustworthy on its own, without needing your personal backing.
Offer collateral instead. Some lenders may waive the personal guarantee if you secure the loan with business assets like equipment, inventory or accounts receivables.
Incorporate your business. Setting up an LLC or corporation helps separate your personal and business finances. It won’t remove the need for a personal guarantee right away, but as your business builds a solid track record, lenders may be more willing to drop it.
Work with lenders that specialize in no-guarantee financing. Some online lenders and loan marketplaces offer funding without a personal guarantee. But other requirements are likely stricter and you’ll typically pay a higher rate.
Show strong financials. Demonstrating steady revenue, profitability and good cash flow may convince a lender that your business can stand on its own without the need for a personal guarantee.
Request a limited guarantee. If you can’t get the personal guarantee waived completely, ask the lender to cap your liability to a certain amount or percentage, especially if you’re one of several business partners.
Negotiate with the lender. Don’t assume a personal guarantee requirement is set in stone. Some lenders may be willing to adjust or remove it based on your business profile.
Alternatives to business lines of credit without a personal guarantee
Here are some other types of business financing that might work for you:
LOC with a personal guarantee. If you sign a personal guarantee, you may qualify for a better rate and higher credit limit, possibly even an LOC of up to $500K.
Business credit cards. It could be easier to qualify for a business credit card than a no-PG business line of credit. But it might come with higher rates, and you won’t have ready access to cash as you would with an LOC — unless you take out a cash advance.
Invoice factoring or financing. B2B firms with unpaid invoices could benefit from invoice financing or invoice factoring, but you may need to make weekly or even daily payments, which could be a struggle.
Equipment financing. When you finance equipment for your business, the equipment acts as collateral for the loan, which can get you a better rate. Plus, an equipment loan can preserve your cash for other purposes.
Term loans. There may be personal guarantee requirements for business term loans, but lenders typically offer both secured and unsecured options that could meet your needs.
Merchant cash advances. For companies with a lot of credit card sales, a merchant cash advance can be a fast way to access working capital, but it is one of the more expensive business financing options.
Bottom line
Qualifying for a business line of credit with no personal guarantee is challenging, but it can be done. It’s easier for well-established companies with good business credit. But if you have strong financials or collateral, even newer businesses may qualify for a no-PG business line of credit.
Frequently asked questions
Most business loan lenders check borrowers' credit scores as part of the application process, even if you're not signing a personal guarantee. Because it's your business, lenders usually want to see that you've been responsible with both personal and professional debt.
To get a business line of credit, you'll most likely need a credit score of at least 600 to qualify, although a few lenders accept lower scores or offer LOCs with instant approval. However, credit scores of at least 700 or more are needed to qualify for the best rates and loan terms.
It depends on the lender. Some only do a soft inquiry to check your score before the actual application process, while others may conduct a full hard inquiry to dig deeper into your credit profile. However, lenders are required to get your permission before doing a hard pull, so it won't happen without your authorization.
You may be able to get a business loan without a personal guarantee, but you'll typically need a well-established company with good business credit and strong financials. Or you may be able to qualify for alternative types of financing, such as merchant cash advances or invoice factoring.
You can get a business line of credit without a personal guarantee from certain lenders that focus on revenue or collateral instead of your personal finances.
The easiest way to find these companies is by using a loan marketplace like Lendio or Clarify Capital. Marketplaces work with a network of lenders, including those that offer no-PG options, and can help match you with the ones that fit your eligibility.
Yes, it is possible to build business credit without relying on your personal credit. Here's what you need to do:
Set your business up as a legal entity (LLC or corporation).
Obtain an Employer Identification Number (EIN) from the IRS.
Set up a business bank account.
Open accounts with vendors that report to business credit bureaus.
Make consistent on-time payments.
Keep in mind that lenders may still check your personal credit score when you apply for a loan, especially if your business is relatively new.
Lacey Stark is a freelance personal finance writer for Finder, specializing
in banking, loans, investing, estate planning, and more. She has 20
years of experience writing and editing for magazines, newspapers, and
online publications. A word nerd from childhood, Lacey officially got her
start reporting on live sporting events and moved on to cover topics
such as construction, technology, and travel before finding her niche in
personal finance. Originally from New England, she received her
bachelor’s degree from the University of Denver and completed a
postgraduate journalism program at Metropolitan State University also
in Denver. She currently lives in Chicagoland with her dog Chunk and
likes to read and play golf.
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Christi Gorbett is a freelance writer with more than eight years of experience and a master's degree in English. She’s created a wide range of content for banks, financial product comparison sites, and marketing companies on topics like small business loans, credit cards, mortgages, retirement planning, lender reviews, and more.
As a former teacher, Christi excels at making complex financial topics accessible and easy to understand. Her interest in finance grew when she returned to the U.S. after living in South Korea for nearly a decade.
This shift was driven by several personal financial challenges: rebuilding her financial base after the move home, starting her own business, and catching up on retirement savings. These experiences deepened Christi’s practical understanding of finance and intensified her interest in the field.
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