By Eugene Maslov, Founder and Finance Broker at Lendr360
Published 28 September 2026 · Last reviewed 28 September 2026
One word in a loan advertisement can create a very expensive misunderstanding.
An unsecured business loan can still require a personal guarantee. Before choosing finance, it helps to separate two questions: what assets secure the borrowing, and who may have to repay it?
Asset security and a personal guarantee are different
Asset security gives a lender rights over assets offered as collateral, such as equipment or property, under the finance agreement.
A personal guarantee creates a separate personal obligation. If the business cannot repay, the guarantor may have to pay under the guarantee’s terms.
These arrangements can exist together. A loan advertised as requiring “no upfront security” may still require a director or business-owner guarantee. A lender’s public guidance expressly describes this combination.
Read beyond “no upfront security”
The word upfront matters.
The same lender’s guidance explains that its contract can allow security over assets in specified circumstances, including default. That is why the advertising headline should never replace a review of the actual loan and guarantee documents.
Ask the lender to identify any clauses dealing with guarantees, charges over assets and security registrations. Have your solicitor explain what those clauses mean for your circumstances.
Three questions to ask before signing
1. What am I guaranteeing?
Identify the borrower and obligations covered. Ask whether the guarantee relates only to this facility or could extend to other borrowing.
2. Is my liability limited?
Ask for the maximum exposure in writing, including how interest, fees and recovery costs are treated. A stated loan amount should not be your only reference point.
3. When does the guarantee end?
Ask what must happen for you to be released and what written confirmation you will receive. Have your solicitor check the position if you sell the business, leave as a director or refinance.
ASIC’s Moneysmart recommends independent accounting and legal advice before guaranteeing a business loan.
Sole traders need to check their position too
If you operate as a sole trader, you are personally responsible for the business’s debts and losses. Personal exposure is therefore not just a question of whether you sign a director’s guarantee.
Your business structure and the identity of the borrower matter alongside the security arrangements.
Prepare before comparing offers
Alongside the repayment quote, request the proposed loan agreement, guarantee and any security documents early. Put these together with your cash-flow forecast and a list of existing finance commitments. This gives your advisers a clearer picture of both the proposed borrowing and your ability to manage it.
Talk through your business finance options
Explore Lendr360’s business loan options and talk to our team about your funding purpose, repayment needs and the proposed lender requirements.
Bring your questions about security and guarantees into that discussion early, then obtain independent legal advice before signing.
Call Lendr360 on 1800 870 779.
General information for business-purpose finance only, not legal advice. Guarantee obligations depend on the agreement and circumstances. Finance is subject to lender assessment, eligibility and terms.
Sources: Lender guidance on unsecured business loans · ASIC Moneysmart: Going guarantor · business.gov.au: Sole trader.