When exploring finance options for your business, the provider of a business loan or other source of funding may ask you to provide a personal guarantee. Although a personal guarantee is not uncommon, there seems to be a lack of understanding from small business owners about exactly what it means.

Research by an SME loan provider found that more than half (55 percent) of 510 SME senior decision makers did not know what a personal guarantee was. 21 percent of those thought it was a commitment from the business owner to repay the money to their best of their ability, while 61 percent believed personal guarantees related to business rather than personal assets.…