# Personal guarantee — what it means when your company borrows > A personal guarantee makes you personally liable for your company's finance. Here's why NZ lenders ask for one, what it costs your limited-liability protection, and how to handle it. Source: https://tradiefinance.co.nz/glossary/personal-guarantee Published: 2026-05-15T08:00:00.000Z Category: business-finance Tags: glossary, business-finance Image: https://tradiefinance.co.nz/images/resources/generated/tradie/glossary/personal-guarantee-primary.jpg Image alt: A tradie reviewing finance options for Personal guarantee — what it means when your company borrows --- If your company borrows to buy a ute or a machine, the lender will very often ask you — the director — to sign a **personal guarantee**. It's a small bit of paper that does a big thing: it puts your own money behind the company's loan. Worth understanding properly before you sign, because it changes what's at stake if things go wrong. ## What it is A **personal guarantee** is a promise you sign in your own name to repay a business debt if the company can't. The company is the borrower. The guarantee makes you the backstop. If the company misses payments or goes under, the lender can come after you personally — your savings, sometimes your house — to recover what's owed. That's the part that catches people out. The whole point of trading through a limited company is that the company is its own legal person: if it fails, your personal assets are normally protected. A personal guarantee deliberately removes that protection for this one debt. You've voluntarily agreed to stand behind it. It's different from the [security interest](/glossary/security-interest-ppsr) the lender already holds over the asset. The security lets them repossess the ute or the gear. The guarantee lets them chase you for any shortfall left over after they've sold it. ## How it works and when it matters for tradies Lenders ask for guarantees because most trade companies are small, newish, and asset-light. A two-year-old plumbing company doesn't have a long balance sheet to lend against — but the director usually does. The guarantee gives the lender comfort that someone with skin in the game is on the hook. In our experience you should expect it especially when: - The company is **newly set up** or under a couple of years trading. - The financials are thin, or you're going [low-doc](/glossary/low-doc-loan). - The loan is large relative to the company's size or assets. Here's the maths that makes it real (illustrative numbers only). Say your company finances a $60,000 ute, falls over 18 months in, and still owes $42,000. The lender repossesses and sells it for $33,000. That $9,000 shortfall doesn't disappear with the company — under your guarantee, it's yours to pay. A few things to weigh before you sign: - **Read what's actually covered.** Some guarantees are limited to one specific loan. Others are "all monies" — covering everything the company owes that lender, now and in future. Know which you're signing. - **Joint guarantees.** Two directors often sign jointly and severally, meaning the lender can pursue either of you for the *full* amount, not half each. - **Your spouse.** If the family home is jointly owned, a lender may want both owners to sign before it counts as security. A personal guarantee is a real, enforceable obligation — not a formality. Before you sign, have your accountant and ideally a lawyer look at the wording, especially anything 'all monies' or that touches the family home. As your broker, we'll tell you straight when a guarantee is being asked for and why, and whether the structure is reasonable for where your business is at. None of this means a guarantee is a bad deal. For most growing trade businesses it's simply the price of access to [unsecured or lightly-secured finance](/glossary/secured-vs-unsecured-finance) before the company has a track record. We see them signed every week. The honest position: it's normal, it's manageable, and it's not something to skim over. ## See also - [Secured vs unsecured finance](/glossary/secured-vs-unsecured-finance) - [Security interest (PPSR)](/glossary/security-interest-ppsr) - [Low-doc loan](/glossary/low-doc-loan) ## Talk it through before you sign We're a finance broker, not a lender — so when a lender asks for a personal guarantee, our job is to tell you straight whether it's reasonable for where your business is at and help you understand exactly what you'd be on the hook for. Have a read of the wording with your accountant or lawyer, then [book a call](/book-a-call) and we'll walk through it with you.