Commercial Finance
Do Directors Need To Provide Guarantees?
5 min read- Finance Guide
- Updated 2026
Quick answer
Usually yes
3 key
things lenders usually assess
- Borrowing entity Company or trust
- Deal strength LVR and property risk
- Director support Common requirement
- Exceptions Sometimes negotiable
1300 421 044
1300 421 044
Director guarantees are usually driven by two main factors
The borrowing structure
Where a company or trust is the borrower, lenders often want the directors or key individuals behind that entity to stand behind the debt personally.
STRUCTURE-BASED RISK
The strength of the deal
Loan size, LVR, property type, income strength and the borrower's financial position can all affect whether guarantees are required and how wide they need to be.
DEAL-BASED LIMITWhen guarantees are more likely
Lenders often look for more support where the transaction carries more risk
-
Company or trust borrower with standard commercial security Commonly required
-
Higher leverage or more specialised property More likely
-
Lower leverage with very strong borrower profile Sometimes negotiable
For example, a company buying a commercial property with a higher leverage structure may almost always be asked to provide director guarantees, while a lower risk deal may sometimes allow narrower or limited support terms.
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Why Lenders Usually Ask For Director Guarantees
Where an entity is borrowing, lenders commonly review the following:
The company or trust
is legally separate from the individuals behind it- The lender wants
personal support from key decision makers
- The property alone may
not be the lender's only security
- The lender wants added
repayment comfort
- The directors control
the borrower and the underlying business decisions
This is why guarantees are often standard practice in commercial lending where companies or trusts are involved.
When Guarantees May Be Limited Or Negotiated
Although common, guarantees are not always identical. Factors that may influence scope include:
Lower loan to
value ratio- Stronger
balance sheet or borrower profile
- More standard
security and simpler structure
Some lenders may still require guarantees, but the exact form or breadth can differ depending on the deal.
Common Guarantee Scenarios
Director guarantees can apply in a range of commercial finance situations.
Typical examples include:
Company Purchase
Very common
Directors often required to support the loan
Trust Borrowing
Also common
Guarantees often required from key parties
Stronger Low Risk Deals
Sometimes flexible
Guarantee scope may be negotiated
Each lender has its own policy on who must guarantee and how those guarantees are documented.
Common problems borrowers face
Director guarantees are common in commercial property finance, but many borrowers do not fully understand when they apply or how broad they can be
Assuming The Property Alone Is Enough
Borrowers sometimes assume the commercial property itself will be the only security, but lenders may still want personal support from directors
Possible solutions include:
-
Reviewing
likely security requirements early
-
Understanding
entity based lending risk
-
Structuring the
application carefully
Not Understanding Personal Exposure
Some directors do not realise that a guarantee can create personal liability in support of the business debt
The exact legal effect should always be understood before signing
Different lenders and structures may produce different outcomes
Assuming Guarantees Can Never Be Negotiated
In some stronger deals, the lender may be open to discussions around scope, but many borrowers never test the issue properly
Deal quality and lender selection can matter here
Applying With The Wrong Lender
Different lenders have very different policies around guarantees, leverage and entity borrowing
Using lenders experienced in commercial property finance can improve structure, negotiation position and approval chances.
Steps to understand director guarantee requirements
Step
01
Confirm whether the borrower will be an individual, company or trust.
Step
02
Review the likely loan size, leverage and overall risk profile of the deal.
Step
03
Prepare entity documents and financial information for lender review.
Step
04
Ask the lender what guarantee support is expected and who must provide it.
Step
05
Review whether the guarantee terms are standard or whether any limitations may be available.
Step
06
Proceed once the guarantee position and full lending structure are clearly understood.
Speak with a Development Finance Specialist
Commercial property finance can vary significantly depending on the borrowing entity, security position, loan size and guarantee requirements.
A specialist can review your scenario and help determine which lenders may be suited to the structure and what support is likely to be required.
Speak with a finance specialist about your commercial property loan.
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