Debt Fund Raise · Question

Can promoters avoid giving personal guarantees when raising debt?

Short answer

Sometimes, but it is not the norm. Lenders to private companies usually ask promoters for a personal guarantee because it ties the owner to the loan. Relief becomes possible when the business is strong, the security is ample, a credit guarantee scheme covers the loan, or the promoter group has a long clean record. No one can promise a waiver; the lender decides.

In more detail

A personal guarantee is a signed promise that the promoter will repay if the company cannot. For a lender, it addresses a plain concern: a company is a separate legal entity, so without this promise the owner could walk away from a failing business with limited consequence.

Lenders weigh several things when asked to relax the requirement. Strong audited financials, healthy coverage of instalments, good conduct on existing loans and valuable tangible security all strengthen your case. A government-backed guarantee cover, where the loan is eligible, may reduce what the lender demands from the promoter. Eligibility and terms are set by the scheme, so check them directly.

Complete removal is rare. More often you can negotiate around the edges:

Limiting the guarantee to a stated amount rather than the full facility.
Asking for release once a set portion is repaid with clean conduct.
Offering additional security from the company in place of personal liability.
Restricting which promoters or family members must sign.

Read the wording

A guarantee can extend to interest, charges and future facilities. Have the document reviewed by your own legal adviser before signing, and understand which personal assets are exposed.

Pushing hard for a waiver on a weak proposal can slow the process. Often the practical move is to strengthen the proposal first, then raise the guarantee as a point of discussion.

Key points

Most lenders to private companies expect promoter personal guarantees as standard practice.
Relief depends on financial strength, security cover and conduct on past borrowing.
Credit guarantee schemes may reduce the need, subject to their own eligibility.
Partial limits and release triggers are more common than a full waiver.
Read the guarantee wording closely, including future liabilities it may cover.

Who this applies to

Promoters of private companies preparing a first or fresh borrowing proposal.
Family businesses worried about exposing personal and household assets.
Founders comparing offers where guarantee conditions differ.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority. Lalsar Holdings' financial advisory and financing work is advisory and facilitation only. Lalsar Holdings is not a lender. Sanction and disbursement of any credit facility is at the sole discretion of the partner bank, NBFC, or financial institution involved, subject to their own eligibility criteria and credit policy.