AFO · Glossary
Personal Guarantee
A commitment by an individual (typically a founder or controlling shareholder) to be personally liable for a business loan if the business defaults.
What this term means in practice
A personal guarantee makes an individual — usually a founder or controlling shareholder — personally liable for the business's debt. If the business defaults, the lender can pursue the guarantor's personal assets (real estate, investment accounts, RRSPs in some cases) up to the guaranteed amount, sometimes joint and several across multiple guarantors.
Personal guarantees are nearly universal on Canadian small-business loans. CSBFP requires them. Most chartered banks require them on facilities under a certain size, until the business has the audited track record to stand on its own credit. The amount can be capped (limited guarantee) or unlimited; the carve-outs and burn-off provisions are where the negotiation happens.
Removing a personal guarantee is a structural milestone — usually triggered by hitting a covenant threshold for several consecutive quarters or by refinancing the facility once the business has matured. It's worth negotiating a clear "burn-off" trigger at origination rather than relying on the lender's discretion later, when the business has more leverage but also more inertia in the relationship.
Where this matters in the catalog
Programs that turn on Personal Guarantee.
CSBFP — Canada Small Business Financing Program
Government-backed term loan for equipment, leasehold, and real property. Up to $1.15M.
Conventional Senior Term Loan or Revolver
Cash-flow-underwritten facility from a chartered bank, credit union, or Schedule II lender.
Where the definition meets your situation.
The CPA can walk through how this concept applies to your business in twenty minutes — what providers will ask, where the negotiation matters, what the trade-offs actually look like in your numbers.