Quick answer
Most company loans need a director guarantee, so true no-guarantor lending is rare. The real choice is usually whether to add a third-party guarantor, such as a parent or business partner, to get a larger or cheaper loan. A guarantor can strengthen a thin application but puts that person's money, and sometimes home, at risk. Going without means relying on the business's own figures, assets or invoices instead.
Key points
- Director guarantees are near universal for company loans; it's third-party guarantors that are optional
- A guarantor can lift the amount or improve the terms when the business's own numbers are thin
- Under the Banking Code, banks generally can't accept a third-party guarantee until the third day after giving the documents
- Guarantees should be capped, and banks that follow the Code must cap them at a set amount or the value of the security
- Without a guarantor, property, equipment or invoices can often do the job instead
- Director guarantee
- Standard for most company loans
- Third-party guarantor
- Optional; used to strengthen an application
- Bank waiting period
- Third day after documents, unless an exception applies
- Alternatives
- Property, asset or invoice security
“No guarantor” means different things depending on who’s asking. A company director usually means “without my personal guarantee”, which is rare. A young owner usually means “without asking Mum and Dad”, which is common and often achievable. Sorting out which version you mean is the first step, because the answer to each is quite different.
Three kinds of guarantee, plainly
A guarantor steps into the borrower’s shoes if repayments stop: business.gov.au’s glossary makes the point that this person becomes legally liable for the debt. In business lending, guarantees come in three forms:
- Director guarantee. The directors of the borrowing company guarantee its loan. Almost every lender, bank or non-bank, asks for this. It’s close to a condition of lending to a company. See director guarantee.
- Third-party guarantee. Someone outside the business, often a parent, partner or relative, guarantees the loan and may offer their property as security.
- No personal guarantee. Uncommon for small businesses. It turns up mainly with larger established companies, with equipment finance where the asset covers the debt comfortably, or with some government-backed schemes when they’re running.
When the Reserve Bank surveyed small businesses on finance, owners who wanted to grow named the collateral and personal guarantees lenders demand as one of their main concerns. You’re not alone if this is the sticking point.
The comparison
| With a third-party guarantor | Without one | |
|---|---|---|
| Borrowing amount | Can be higher, especially if the guarantor offers property | Limited to what the business, its assets and its directors support |
| Approval chances | Better for new, thin or blemished applications | Depend on turnover, trading time and credit |
| Cost | Can be lower if the guarantee reduces the lender’s risk | Priced on the business’s own risk |
| Speed | Slower: guarantor documents, advice and waiting periods | Faster; fewer people to coordinate |
| Who carries the risk | You plus someone who doesn’t control the business | You and your fellow directors |
| Relationships | A default can strain family ties badly | Contained to the business owners |
| Exit | Guarantor released only by refinance, repayment or lender agreement | Nothing extra to unwind |
What protections does a guarantor get?
The Banking Code of Practice, the industry code most Australian banks follow, has a whole part on guarantees for loans to individuals and small businesses. Under the 2025 version, a subscribing bank:
- must cap the guarantee at a specific amount, or at the value of specified security when it’s recovered;
- won’t accept the guarantee until the third day after giving the guarantor the required documents, unless an exception applies (for example, the guarantor confirms they’ve had independent legal advice);
- must give the guarantor key information directly, including the proposed loan contract, recent financial statements and any recent demands made on the borrower;
- must let the guarantor withdraw before credit is first provided, or later if the final loan differs materially from what they were shown;
- generally must try the borrower’s security first before turning to the guarantor.
Non-bank and private lenders may not subscribe to the Code. That doesn’t make their guarantees unfair, but it does mean the guarantor should ask for a cap and independent advice rather than assume they’ll be offered. Our guide to business loans and personal guarantees goes further.
When does adding a guarantor win?
- The business is new. Six months of trading rarely supports the amount needed to buy a business or fit out premises.
- There’s no property in the business owner’s name. A parent’s equity can stand in, through a guarantee secured on their home.
- Credit history is the obstacle. A guarantor with clean credit and strong assets can carry an application a lender would otherwise decline.
- The guarantor is genuinely comfortable, understands the business, has had their own advice, and could absorb the capped amount without losing their home.
If that’s your situation, read business loans with a guarantor for how lenders assess the guarantor alongside you.
When does going without win?
- You can offer something else. Property equity, the vehicle or machinery being bought, or a debtor book through invoice finance.
- The amount is modest. Unsecured lenders sizing on turnover usually ask only for director guarantees.
- The family relationship matters more than the loan. A smaller loan now, with a bigger one when trading history builds, is often the wiser sequence.
- Speed counts. Fewer parties means fewer signatures and no waiting period.
Our page on business loans with no guarantor sets out which products rely least on outside support.
Not sure whether you’d need one? Ask us through the short form for a straight answer; it isn’t treated as a credit application.
Example: a café purchase
Illustrative only. Sam, 29, wants to buy an established café for $180k. Sam has $50k saved, rents a flat and has eight years in hospitality but no business of their own yet.
- Without a guarantor: an acquisition lender looks at the café’s trading history and Sam’s experience, but with no property and a first business, the offer covers only part of the $130k gap.
- With a guarantor: Sam’s parent offers a guarantee capped at $130k and secured on their home. The lender can now fund the gap. The parent takes legal advice, the guarantee is limited, and Sam plans to refinance it away after two years of trading.
- A middle path: the vendor agrees to carry $40k as vendor finance, and the lender funds the rest without a guarantor at a smaller amount.
Both routes get Sam the café. Only one leaves the parent’s house out of the paperwork, and that difference deserves a proper conversation before signatures go on anything.
Checklist for borrowers and guarantors
- Is a director guarantee all that’s being asked, or a third-party one too?
- Is the third-party guarantee capped, and at what amount?
- Is the guarantor’s property being mortgaged as well?
- Has the guarantor received the loan documents directly and had independent advice?
- Could property, equipment, invoices or vendor finance replace the guarantee?
- How and when will the guarantor be released? Note that guarantees can be joint and several.
Find the version that doesn’t need a favour
Asking a family member to guarantee your loan is a big request, and often there’s another way to structure the deal. Looking for that path is part of what our team does. Getting your details to us takes roughly a minute, and doing so won’t register as a credit enquiry. Enquiries aren’t onsold or handed to a panel, which keeps your phone quiet. A specialist reads through your circumstances and calls you personally. Be candid on the form about trading time, assets and any credit issues, so the suggestion you get first is a realistic one.
Frequently asked questions
Can I get a business loan with no guarantor at all?
For a sole trader, you're personally liable anyway, so no guarantee is needed. For a company, nearly every lender wants the directors to guarantee the loan. Loans with no personal guarantee at all do exist, mainly for large, established businesses with strong balance sheets or where an asset fully secures the debt.
What is the difference between a director guarantee and a guarantor?
A director guarantee is given by the people who run the borrowing company. A third-party guarantor is someone outside the business, such as a parent or friend, who agrees to repay if the business can't. Both create personal liability, but the third party has no control over the business.
Can a guarantor limit how much they owe?
Yes, and they should ask. Banks that subscribe to the Banking Code must cap a guarantee at a set amount or the value of specific security, and guarantors can ask in writing to limit their liability further. Non-bank lenders may not follow the Code, so negotiate the cap into the document.
Will being a guarantor affect my credit file?
A credit enquiry may be recorded when a lender checks a guarantor's credit, and a guarantee can count against their own borrowing capacity because lenders treat it as a possible debt. If the borrower defaults and the lender pursues the guarantor, that can affect their credit history too.
Can a guarantor withdraw?
Under the Banking Code, a guarantor can withdraw before the bank first provides credit, or later if the final loan differs materially from what they were shown. After that, release usually requires the lender's agreement, refinance or repayment up to the guarantee limit.
What can I offer instead of a guarantor?
Property equity, the equipment you're buying, your unpaid invoices or a larger deposit. A longer trading record and tidy bank statements also reduce how much a lender relies on a guarantee.