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Personal Guarantee

By Jason Taken, business broker · HedgeStone Business Advisors · Updated 2026-09-25 · 1 min read

A personal guarantee is a promise by an individual to be personally responsible for a business obligation — most often a lease or an acquisition loan — if the business fails to perform. It puts personal assets behind a business debt.

Why Does Personal Guarantee Matter in a Laundromat Sale?

Personal guarantees appear twice in a laundromat transaction: on the lease, where a landlord usually wants one from the incoming tenant, and on the loan, where SBA rules generally require unlimited personal guaranties from owners of 20% or more (Source: SBA 7(a) Loans). For a seller, the question is whether the original guaranty is released on assignment; for a buyer, it is what happens if the business does not perform.

What Does It Look Like in Practice?

A seller assigns the lease and the landlord accepts the buyer's guaranty but does not release the seller's. The seller remains contingently liable for a store they no longer own. A release, or at minimum a burn-off after a defined period of buyer performance, is worth negotiating hard.

What Should You Check?

  • Ask whether the seller's existing lease guaranty is released on assignment.
  • Negotiate a burn-off or replacement-guarantor path if a new guaranty is required.
  • Confirm which owners the lender will require guaranties from and on what terms.

Where Does This Come Up?

  • SBA 7(a) — SBA 7(a) is the U.S. Small Business Administration's primary loan guaranty program
  • Lease Assignment — A lease assignment transfers a tenant's rights and obligations under an existing lease to a new tenant
  • Seller Note — A seller note is financing provided by the seller
  • DSCR (Debt Service Coverage Ratio) — DSCR, or debt service coverage ratio

See the full laundromat glossary for all 78 terms.

The Next Step

Sources

This page is general information about laundromat transactions, not legal, tax, or investment advice, and not a guarantee of sale price, timing, or financing approval. Verify current rules with your own CPA, attorney, lender, and the relevant state or municipal agency before acting.