Side-by-Side Comparison

Limited vs. Unlimited Personal Guaranty: How Much Does the Cap Matter?

An unlimited guaranty on a 5-year $5,000/month lease creates $300,000+ in exposure vs. $90,000 with an 18-month cap.

Unlimited Personal Guaranty

5-year lease at $5,000/month, unlimited guaranty

$360,000 total exposure
  • ✓ Standard market position — easier to get lease approved
  • ✓ No negotiation battle over the guaranty structure
  • ✗ Full personal liability for entire remaining lease term
  • ✗ $300,000+ in personal exposure if business closes in year 1
  • ✗ Home, savings, wages — all reachable by the landlord

18-Month Capped Guaranty with Burn-Down

5-year lease at $5,000/month, 18-month cap, 20% annual burn-down

$90,000 total exposure
  • ✓ Maximum personal liability: $90,000 at signing
  • ✓ After year 1: $72,000. After year 3: $36,000
  • ✓ After year 5: $0 — personal obligation fully burned down
  • ✗ Harder to negotiate — requires stronger business case or larger deposit
  • ✗ May require larger security deposit or letter of credit as tradeoff
★ Recommended

The Verdict: 18-Month Capped Guaranty with Burn-Down

A capped burn-down guaranty is dramatically better. The $200,000+ difference in maximum personal exposure is real money — it's the difference between losing an investment and losing your house. Every tenant should push for a capped guaranty. Offer the landlord alternatives: larger deposit, letter of credit, or prepaid rent in exchange for the cap.

Key Factors in This Decision

  • Your business track record and financial strength
  • Market demand for the space
  • What alternative security you can provide

Frequently Asked Questions

What's the best argument for getting a capped guaranty?
Your financial strength and track record. A business with 3+ years of profitable operations has real leverage to negotiate. Also offer a security deposit equal to 3-6 months rent in exchange for a capped guaranty.
What is a 'good guy' clause alternative to a capped guaranty?
A good guy clause lets you exit the guaranty by giving 60-90 days notice and surrendering the space. It caps duration rather than amount — you can leave, but while you're in the space you're fully liable.

Know Which Option Is in Your Lease.

LiabilityScore™ reads your actual lease and tells you exactly what provisions you've signed — with specific dollar amounts and negotiation recommendations.

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