Switchboard Finance Logo – Guarantor Glossary

Guarantor

A Guarantor is a person or company that agrees to take responsibility for a loan if the borrower cannot repay it. Guarantees are commonly required for Business Loans, Low Doc Lending, Equipment Finance, and Vehicle Loans. Related glossary terms: Security, Secured Loan, Director’s Guarantee. Relevant blogs: Fast-Track Asset Finance, Low Doc Cashflow Loans, Red Flags a Business Loan Is Bad.

Why Guarantors Matter

A Guarantor reduces risk for lenders and increases approval strength for borrowers. Lenders often require guarantees from directors, business partners or related entities across the Tradie Hub, Truckie Hub, Café Hub, and Whitecoat Hub.

Common Types of Guarantors

  • Business directors providing personal guarantees.
  • Related companies guaranteeing loans.
  • Family members (less common in business lending).
  • Individuals securing a loan for a business they manage.
  • Shareholders guaranteeing finance for asset purchases.

Official info: asic.gov.au

What does a Guarantor do?
A Guarantor agrees to repay the loan if the borrower cannot meet their obligations.
Do all loans require a Guarantor?
No — but many business and asset finance lenders require guarantees from directors.
Does being a Guarantor affect my credit?
Yes — if the borrower defaults, the Guarantor becomes responsible and it may impact their credit file.
Can a Guarantor be removed?
Sometimes — but only if the lender agrees or the loan is refinanced without a guarantee.
Is being a Guarantor risky?
Yes — the Guarantor may need to repay the full loan if the borrower cannot.