Create a legally binding personal guarantee for business loans, leases, and credit obligations. Customize guarantee type, waivers, subordination, and remedies with real-time document preview.
A personal guarantee is a legally binding agreement in which an individual assumes personal liability for the debt or obligation of a business entity. When a creditor extends credit to a business — whether through a loan, lease, line of credit, or trade account — they often require one or more individuals (typically owners, officers, or directors) to personally guarantee repayment. This means the guarantor’s personal assets are at risk if the business fails to meet its obligations.
Personal guarantees are one of the most common credit enhancement tools in commercial lending and leasing. They bridge the gap between the credit risk a lender perceives in the business entity and the comfort level needed to extend financing. For small and medium-sized businesses, especially LLCs and corporations with limited operating history, a personal guarantee is often a non-negotiable condition for obtaining credit.
This generator creates a comprehensive personal guarantee document covering all essential provisions: guarantee scope (unlimited or limited), nature of the guarantee (absolute or conditional), continuing guarantee provisions, waivers of common legal defenses, subordination and subrogation terms, representations and warranties, covenants, creditor rights, default provisions, and remedies. The document is structured to be enforceable in all 50 U.S. states.
An unlimited personal guarantee makes the guarantor liable for the full amount of the underlying obligation, including principal, interest, fees, and collection costs, with no cap on exposure. A limited guarantee restricts the guarantor’s maximum liability to a specific dollar amount. Limited guarantees are common when multiple owners each guarantee a portion of the debt based on their ownership percentage.
Generally, a personal guarantee cannot be unilaterally revoked. A continuing guarantee may allow the guarantor to revoke liability for future obligations by providing written notice to the creditor, but existing obligations remain guaranteed. The creditor must agree to release the guarantor, which typically requires paying off the guaranteed debt or substituting acceptable collateral or another guarantor.
Common waivers include notice of default, presentment and demand, protest, exhaustion of remedies against the debtor, marshaling of assets, statute of limitations defenses, discharge defenses, and modification consent. These waivers strengthen the creditor’s position by removing procedural requirements that might otherwise delay collection from the guarantor.
A personal guarantee survives the debtor’s bankruptcy. While the automatic stay protects the debtor from collection actions, it does not extend to guarantors. The creditor can pursue the guarantor directly for the guaranteed obligations. Additionally, most well-drafted guarantees include reinstatement provisions, meaning that if any payment the creditor received is later clawed back in bankruptcy, the guarantee is automatically reinstated.
A continuing guarantee covers not only the current obligation but also all future obligations between the debtor and creditor. It remains in force until the guarantor gives written notice of revocation or until all guaranteed obligations are paid in full. This is common in revolving credit facilities and ongoing commercial relationships where the debt balance fluctuates over time.
Yes, from the creditor’s perspective. Subordination clauses prevent the guarantor from competing with the creditor for repayment from the debtor. Subrogation waiver provisions prevent the guarantor from stepping into the creditor’s shoes after making a payment and potentially disrupting the creditor’s collection efforts. Both provisions protect the creditor’s priority position until the debt is fully satisfied.