If you run a company in New Zealand, sooner or later someone will slide a personal guarantee across the table: a lender, a landlord, a supplier offering trade credit. It’s usually presented as a formality. It isn’t — but it’s not something to panic about either. It just needs to be understood.
What is a personal guarantee?
It’s a promise you make, personally, to pay someone else’s debt if they don’t. In business, the “someone else” is usually your own company.
Normally, a limited company protects its owners: if the company can’t pay its debts, creditors generally can’t come after the shareholders’ personal assets. A personal guarantee is a deliberate exception to that. It gives the creditor a second person to pursue — you.
Three parties are involved:
- the creditor (the lender, landlord or supplier);
- the debtor (your company);
- the guarantor (you, or whoever signs).
Why do lenders ask for them?
Because a small company’s balance sheet often isn’t enough on its own. A guarantee aligns the owner’s interests with the lender’s and gives the lender comfort that the people running the business are committed to repaying.
For unsecured business loans, a director’s guarantee is very common. For property-secured loans, the property owner’s involvement is central, and a guarantee may be part of the package too. A 2026 University of Auckland commentary on New Zealand’s business finance system noted how frequently banks seek personal guarantees or property backing from small firms — it’s the norm, not the exception.
What’s the difference between limited and unlimited?
| Limited guarantee | Unlimited guarantee | |
|---|---|---|
| What you could owe | Up to a stated cap | The whole debt, plus interest and costs |
| Typical use | Negotiated where there are several guarantors or strong security | Common default in lender documents |
| Worth asking for? | Yes, if the lender will agree | Understand the full exposure |
Even a “limited” guarantee usually adds interest, enforcement costs and legal fees on top of the cap, so read how the limit is defined.
What is a continuing or “all obligations” guarantee?
This is the clause people most often miss. Some guarantees cover only this loan. Others cover all obligations the company has to that creditor, now and in the future — including loans and facilities you haven’t taken out yet.
A continuing guarantee to a supplier, for example, could apply to every future order, months or years after you signed. As one New Zealand law firm puts it, a personal guarantee “should never be signed simply because someone asks you to.”
Before you sign, ask the creditor one question: “Exactly which debts does this guarantee cover, and does it cover future ones?”
Is my house at risk?
It can be. If you’re called on under a guarantee and can’t pay, the creditor can pursue your personal assets, which may ultimately include your home. Some guarantees are also backed by a mortgage over property, which makes the link direct.
That’s why honest conversations at home matter. Our guide on talking to your partner about using home equity can help. If your home is owned jointly, your partner’s position is affected too, and relationship property rules may come into play.
What happens if I leave the business?
Resigning as a director or selling your shares doesn’t automatically end a guarantee. You’ll need the creditor to agree, in writing, to release you. When partners part ways, releasing guarantees should be part of the deal. See buying out a partner.
Can a guarantee be challenged?
Occasionally — for example, if it wasn’t properly signed, or the underlying agreement was materially changed without the guarantor’s consent. But these are exceptions, and relying on them is not a plan. The protection that works is understanding the guarantee before you sign.
Questions to ask before you sign
- Is this guarantee limited or unlimited? If limited, how is the cap defined?
- Does it cover only this loan, or all present and future obligations?
- Are there other guarantors, and can the creditor pursue any one of us for the whole amount?
- Is it backed by security over my property?
- How can I be released, and what happens if I leave the company?
- Has everyone signing had independent legal advice?
Lenders commonly require guarantors to get independent legal advice, and a lawyer will usually sign a certificate confirming it was given. Treat that meeting as genuinely useful, not a box to tick.
How to keep guarantees manageable
- Keep a register of every guarantee you’ve signed: who to, when, and for what.
- Negotiate a cap where you can, especially for supplier accounts.
- Ask for releases when facilities are repaid or closed.
- Don’t let guarantees pile up across several lenders for the same business.
Where LendFriend fits
When we match you with a lender from our panel, we’ll tell you upfront if a guarantee is likely to be required and what it would cover, so there are no surprises at signing. Every loan is priced on your individual situation — and understanding exactly what you’re committing to is part of finding the right option.
And if you do need funding…
That's where we come in. Tell us what's going on and we'll match you with a lender from our panel that fits — and tell you honestly if borrowing isn't the right move.
Quick questions
Does a limited company protect me if I sign a personal guarantee?
Not for that debt. A company normally limits your personal liability, but a personal guarantee is a separate promise that lets the creditor come to you personally if the company doesn't pay.
Can I get out of a personal guarantee later?
Only if the creditor agrees to release you, or the guarantee's own terms allow it. Leaving the company or selling your shares doesn't release you automatically — ask for a written release.
Should my spouse sign a guarantee for my business?
Only after getting their own independent legal advice and understanding exactly what they're agreeing to. Lenders sometimes ask for a spouse's guarantee, particularly where family property is involved.