Usually yes, most commercial loans require a personal guarantee, meaning you are personally responsible if the loan defaults. Some bridge and larger loans are non-recourse, secured only by the property, but they typically carry standard carve-outs for fraud or misconduct, known as bad-boy provisions. Whether a guarantee is required, and how broad it is, is negotiable on some deals and worth understanding before you sign.
Few loan terms make borrowers more nervous than the personal guarantee, and few are as poorly explained. Here is what it actually means, when it is required, and where you have room to negotiate.
A personal guarantee makes you, the individual, responsible for the loan if the borrowing entity defaults. Without one, the lender's recovery is limited to the property. With one, the lender can pursue your personal assets for any shortfall. Holding the property in an LLC does not change this: the guarantee is designed to reach through the entity, which is exactly why lenders require it.
Most commercial loans, from banks, SBA programs, and most bridge lenders, require a personal guarantee. For SBA loans it is essentially universal for owners with meaningful ownership stakes. For bank loans it is standard. For bridge loans it is common but more negotiable, because the loan is already built around the property.
Non-recourse loans, where the lender's only remedy is the property, do exist. They are mostly found on larger, stabilized, income-producing deals with strong coverage, the kind of loan where the property alone clearly carries the risk. Non-recourse costs something: expect somewhat tighter terms or pricing in exchange for the lender giving up recourse to you.
Even a non-recourse loan is not unconditional. Nearly all include what the industry calls bad-boy carve-outs: provisions that make you personally liable if specific bad acts occur, fraud, misrepresentation, misusing funds, or filing bankruptcy strategically to block the lender. The plain-language summary: run the deal honestly and the carve-outs never touch you. They exist to protect the lender from misconduct, not from market outcomes.
More than most borrowers assume, on the right deal. Guarantees can be limited rather than unlimited: capped at a dollar amount, limited to a percentage of the loan, structured to burn off as the property hits performance targets, or split among partners. A strong property with real equity gives you standing to ask. A thin deal does not. Like most things in commercial lending, the guarantee conversation is a function of how much risk the property itself absorbs.
A personal guarantee is not a trap; it is the lender asking you to stand behind your own plan. The right questions are whether the guarantee is proportionate to the deal, whether any limits or burn-offs are available, and whether you understand exactly what triggers it. Those questions belong in the first conversation, not at the closing table.
If you want a straight answer on what guarantee structure a specific deal is likely to require, send us the property and the plan, and we will tell you what to expect before you are staring at loan documents.
Alan is Managing Partner at BluRidge Funding and has worked in mortgage and real estate finance since 1996, with commercial lending as a principal focus since 2003. He holds an economics degree from BYU and a law degree from the University of Utah, and is a founding board member and former President of the Utah Association of Mortgage Brokers. More about the team.
Send the property, the loan amount, and your timeline. We will tell you whether it looks like something we can help with, usually within one business day.
Submit Deal DetailsNot ready to submit? You can build a one-page deal brief in three minutes first.
Or just call: 801-706-2802