The borrower's personal promise to repay if the deal fails.
A personal guarantee (PG, "guaranty") is a legal commitment by an individual (typically the borrower's principal or principals) to personally repay a loan if the borrower entity fails to. PGs document the recourse provision of a loan and are the legal instrument that lets lenders pursue personal assets in default.
A personal guarantee is the bridge between borrower entity protection (using an LLC) and lender risk control. Without a PG, an investor could form a single-purpose LLC, take a loan in the LLC's name, and have no personal exposure if the deal failed. Lenders won't do that on most loans — they require the principal to sign personally, which effectively pierces the LLC veil for repayment purposes.
PGs come in several flavors. Full personal guarantee makes the guarantor liable for the entire loan balance. Limited personal guarantee caps liability at a percentage of the loan (often 25–50%) or a dollar amount. Joint and several means multiple guarantors are each individually liable for the entire balance (the lender can collect from any one of them). Several only divides liability proportionally — each guarantor liable for their share.
Springing personal guarantee is the gold standard for borrowers: the PG only activates if specific trigger events occur (bad-boy carve-outs, financial covenant breaches, key-man departure). Outside of those triggers, the loan is effectively non-recourse. Springing PGs are common on institutional bridge and CMBS deals, less common on smaller balance loans.
For investors building portfolios, the cumulative personal guarantee exposure across multiple loans is the true downside risk. An investor with 8 rentals each financed by a $300k loan with full PG has $2.4M of aggregate personal guarantee exposure — and if multiple deals fail simultaneously (recession scenario), that's the personal liability they're facing. Track aggregate PG exposure and structure new deals to limit growth where possible.
| Property #1: $385,000 PG | $385,000 |
| Property #2: $295,000 PG | $295,000 |
| Property #3: $410,000 PG | $410,000 |
| Property #4: $325,000 PG (limited to 25%) | $81,250 |
| Property #5: $375,000 PG | $375,000 |
| Property #6: $440,000 PG (springing, dormant) | $0 (dormant) |
| Total active PG exposure | $1,546,250 |
| Personal liquid net worth | $680,000 |
| Coverage ratio (assets / PG) | 44% — under-collateralized |
A legal commitment by an individual (usually the borrower's principal) to personally repay the loan if the borrower entity fails to. PGs make recourse loans enforceable against personal assets.
On most loans under $5M, no — the lender requires personal recourse. On larger institutional deals (CMBS, agency, large bridge), springing or limited PGs are typically available.
Joint and several = each guarantor liable for the entire balance (lender picks who to collect from). Several only = each guarantor liable for their proportional share. Joint and several is more common and more punitive.
In community property states (CA, TX, AZ, etc.) and on personal residence-secured loans, usually yes. On business-purpose loans in separate property states, often no — but always confirm with counsel.
Negotiate limited PG (capped at a percentage), springing PG (only activates on bad-boy events), or burn-off PG (reduces over time). Use separate LLCs for each property. Track aggregate PG exposure.
Matrix structures deals with PG terms that reflect deal size, sponsor, and risk — from full recourse on smaller loans to springing PG on institutional bridge.
