If a business loan is taken out for a registered company, and the company goes out of business, does owner have to pay the loan?


I am curious whether the person is liable to paying back any business loans taken from a bank for a business that they have.

If the business goes out of business, does the load simply vanish?

How easy/difficult is it to get a small business loan for a traditional place for example like a restaraunt or a pool hall?


Accounting Loan

asked Jul 21 '12 at 04:37
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2 Answers


It depends on the terms of the contract.

Typically, lending agencies or banks require an individual to co-sign for the business entity, and that individual is financially liable should the company go under.

answered Jul 21 '12 at 04:44
Henry The Hengineer
4,316 points
  • the Henngineer ah I see, how tough is it to get out of the co-signing? – Genadinik 12 years ago
  • You'll have to ask the bank. Policies vary. – Henry The Hengineer 12 years ago


In addition to Henry's response, it also depends on the legal status of the business.

if your business is a sole proprietorship, then you personally liable for all your debts.

If your business is a limited liability entity (LLC/LLP/LLLP/Corporation), then unless a corporate veil is pierced, you're not liable for the business debts (which is why banks will require to personally guarantee your business loans).

If its a partnership, then you're liable for all the partnership debts (unless its LP and you're a limited partner), even if another partner signed for the debts.

Generally, as with individuals, the banks will want to see your business credit history, balance sheets, and the loan reasons. I don't think you can get out of the personal guarantee for a new business or business with no significant assets. You will probably also need to provide a collateral/mortgage to secure the loan.

If you divert your business loan to your personal account, you'll probably pierce your corporate veil and will be personally liable even if the business is a limited liability entity.

Talk to a lawyer about specifics.

answered Jul 21 '12 at 06:16
5,090 points

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