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Do I need a guarantor for my business loan?

When you request to take out a new business loan, Westpac may ask you for a guarantee. A guarantee ensures that the business loan will be repaid.

There are 2 types of guarantees:

1. First party guarantee

You guarantee the loan by providing security from an asset that you own, usually a property. This is the most common type of guarantee.

2. Third party guarantee

In some cases you’ll need someone else (a person or entity that is not you - the borrower) to guarantee your business loan. They’ll need to provide security from 1 of their assets.

Learn more about what assets can be used to secure a business loan and your borrowing power when using property as security.

What are they guaranteeing?

They're basically guaranteeing that the business loan will be paid.

If you can’t make your business loan repayments, we will ask the guarantor to pay them for you. In some cases, if the repayments aren’t being made, the guarantor may need to sell their asset to cover the remaining debt, or offer further security.

In most cases, the lender will ask the guarantor for a limited guarantee. This usually covers the debt plus any extra costs or interest incurred if loan repayments are delayed.

We know that financial stress can sometimes be a result of unplanned life events such as change of income, illness, a relationship breakdown, reduction in your business cash flow or emergency events like natural disasters.

Westpac Hardship Assistance can help with the financial support you may need.

What if I’m asked to be a guarantor?

This obligation shouldn't be entered into lightly. Before making the commitment, make sure you're comfortable the borrower can meet the loan repayments. As guarantor, you must be willing to cover their repayments if they can't.

Think about your own financial plans and goals and make sure they won't be compromised. Even though you're not borrowing funds for yourself, you may be tying up equity in your property. This may restrict your ability to borrow funds in future.

When can a guarantor be released?

You won't be able to pull out of your obligation as guarantor unless agreed to by both the lender and borrower - or until the business loan has been repaid. 

Before signing up as a guarantor, it's important to speak to your financial advisor about your personal circumstances. You should also seek independent legal advice.

Are there business loans that don’t need a guarantor?

If you aren’t able to guarantee your business loan, we have business loans that may not need a guarantor. Take a look at these finance options:

Things you should know

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness of the information to your own circumstances and, if necessary, seek professional advice.