Personal Guaranty

A personal guaranty is a borrower principal's contractual promise to personally repay some or all of a loan if the borrowing entity defaults, exposing the guarantor's personal assets beyond the pledged real estate. Guaranties can be full (100% of the loan), partial/limited (a capped percentage or dollar amount), or springing (converting from non-recourse to recourse only if specific bad-acts occur).

Personal guaranties are how lenders extend credit to newly formed, thinly capitalized single-asset LLCs — the standard ownership structure for CRE deals — by reaching past the entity to a principal with real personal net worth and liquidity. Without a guaranty, a lender's only recourse in a full recourse scenario would be against an entity that may hold no assets beyond the property itself.

Guaranty terms are heavily negotiated: a full guaranty exposes 100% of the loan to the guarantor's personal assets, while a limited or capped guaranty (e.g., 25–50% of the loan, or a fixed dollar amount) meaningfully reduces exposure while still giving the lender some personal-credit backstop. Springing (or 'bad boy') guaranties are the most borrower-friendly, staying dormant unless specific triggering events like fraud or unauthorized transfers occur.

Sponsors with multiple properties should track aggregate personal guaranty exposure across their entire portfolio, not just per-deal, since a string of moderate guaranties across several properties can add up to material personal balance sheet risk if several deals underperform simultaneously.

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