# How to Buy a Business Without a Personal Guarantee Source: https://apply.grosfjeld-li.com/guides/buy-a-business-without-a-personal-guarantee · By Josh Li, G&L M&A Advisory · Updated 2026-10-14 **Short answer:** You can buy a business without a personal guarantee by giving the lender stronger security elsewhere: usually security over 100% of the business’s assets, a lower share of senior debt, and a seller who keeps a meaningful stake through seller rollover. G&L’s 60/40 structure uses 60% commercial debt and 40% seller rollover, with no personal guarantee from the buyer. **Key points:** - A personal guarantee (PG) makes you personally liable if the business can’t repay. - Lenders ask for one to close a gap in their security. Close the gap another way and the PG can go. - Our 60/40 structure has no PG: the lender takes security over 100% of the business’s assets instead. - Lower senior debt and a large seller rollover make the lender’s position much safer. - Not every lender will agree. Structure and buyer quality decide it. ## What is a personal guarantee? A **personal guarantee (PG)** is a promise that if the business can’t repay its loan, you will, from your own assets: savings, property, sometimes your home. It turns a business debt into a personal one. Lenders ask for a PG because it gives them a second place to recover money if the business fails. For a buyer who already owns a successful company, signing one means betting everything you’ve built on the next deal. There are variations. An **unlimited** guarantee covers the whole debt. A **limited** guarantee is capped at an amount. A **directors’ guarantee** is signed by the company’s directors. Read every version closely with a lawyer. ## Why do lenders ask for a personal guarantee? Because their **security** (the assets they can claim if the loan isn’t repaid) doesn’t fully cover their risk. A lender asks itself three things: 1. **Does the business’s cash flow comfortably cover the repayments?** That’s DSCR, the debt service coverage ratio. See [DSCR explained](https://apply.grosfjeld-li.com/guides/dscr-explained). 2. **If it fails, what can we recover?** That’s the security over assets. 3. **How much of the price are we funding, and who else is at risk?** A PG is the lender’s answer when one of those is weak. Make all three strong and you have a real case for no PG. ## How do you avoid a personal guarantee? The approach we use is to replace the PG with structure: - **Lower the senior debt share.** The less of the price the lender funds, the more the business’s assets cover their loan. - **Give the lender security over 100% of the business’s assets.** Receivables, equipment, contracts and goodwill all sit behind the loan. - **Keep the seller in the deal through seller rollover.** A seller who keeps a large stake is betting on the business too. That’s exactly the reassurance a PG was meant to provide. - **Keep DSCR around 1.5x.** Comfortable coverage reduces the chance the security is ever needed. - **Buy as a credible operator.** An owner already running a $1M+ business in the same industry is a lower-risk borrower than a first-time buyer. ## How does the 60/40 structure work without a personal guarantee? The [60/40 deal structure](https://apply.grosfjeld-li.com/guides/60-40-deal-structure) is built specifically for this. **Illustrative only.** A business sells for $1.5M. | Part | Share | Amount | What it means | |---|---|---|---| | Senior debt (commercial debt) | 60% | $900,000 | Lender funds this, secured over 100% of the business’s assets | | Seller rollover | 40% | $600,000 | The owner rolls $600k into a 40% stake they keep | | Personal guarantee | n/a | $0 | None. The lender relies on the asset security instead | Why a lender can accept this: they are funding 60% of the value, not 100%, and they have first claim over everything the business owns. The seller has $600k riding on the business’s future, which means the person who knows it best is still motivated to see it succeed. This deal has no seller note, so there is no seller finance component. Other structures, such as the [70/20/10](https://apply.grosfjeld-li.com/guides/70-20-10-deal-structure), use senior debt, seller finance and seller rollover together. Whether those carry a PG depends on the lender and the deal; the 60/40 is our structure designed to avoid one. ## Is buying a business without a personal guarantee realistic? It is, but it isn’t automatic. Lenders vary widely. Some will never lend without a PG; others will on the right structure with the right buyer. Things that make a no-PG deal more likely: - Stable, verifiable earnings with low customer concentration. - Real assets and recurring revenue. - A seller willing to keep a large stake. - A buyer whose existing business shows they can run the target. Things that make it unlikely: - A thin DSCR or earnings that rely on add-backs you can’t prove. - A business that depends entirely on the departing owner. - A buyer asking the lender to fund 80–100% of the price. ## What are the trade-offs? Avoiding a PG has a price, and it’s worth naming: - **You own less at settlement.** In a 60/40 you own 60%, not 100%. The seller is your partner on the remaining 40%. - **You need a shareholders’ agreement.** It should cover decision-making, dividends, and how and when you can buy out the seller’s stake later. See [seller rollover explained](https://apply.grosfjeld-li.com/guides/seller-rollover-explained). - **The lender’s security is wide.** Security over 100% of the assets means the lender has strong rights if things go wrong. You’re protecting your personal assets, not the business’s. For most owners who already have a successful company, owning 60% of a business with no personal risk beats owning 100% of one that could take their house. ## What makes sellers say yes to a large rollover? In our experience, sellers who accept a big rollover care about three things: the business continuing, their staff being looked after, and getting paid a fair amount over time rather than walking away. Show them how your operation makes their 40% worth more in a few years than it is today, and the rollover stops sounding like a discount. > This guide is general information, not financial, legal or tax advice. Always have a lawyer review any guarantee or security document before you sign. ## Want to buy without putting your house on the line? On an acquisition strategy call we look at whether a no-PG structure fits your business and target. [See if you qualify](https://apply.grosfjeld-li.com/). ## FAQ ### Can I get a business acquisition loan without a personal guarantee? Sometimes. Lenders are more likely to drop the PG when they fund a lower share of the price, take security over all the business’s assets, and the seller keeps a large stake. It depends on the lender and the deal. ### What happens if I sign a personal guarantee and the business fails? The lender can pursue you personally for the shortfall, up to the limit of the guarantee. That can include savings and property, so get legal advice before signing one. ### What is the 60/40 deal structure? It funds 60% of the price with commercial debt and 40% through seller rollover, where the seller keeps a 40% stake. There is no personal guarantee; the lender takes security over 100% of the business’s assets instead. ### Do SBA or government-backed loans require a personal guarantee? Government-backed small business loan programs commonly require personal guarantees from significant owners. Check the current rules for the program in your country before relying on one. ### Is a limited personal guarantee better than an unlimited one? A limited guarantee caps what you can lose at a set amount, so it is less risky than an unlimited one. It is still personal liability, so negotiate the cap and the release terms with a lawyer. ### Does seller finance need a personal guarantee? Some sellers ask for one on their note, and many don’t when they hold security or a rollover stake. It is negotiable, so put your position in the LOI.