Personal guarantees, deposits and other ways to protect your lease
“I want a tenant, but I need protection if they fail.”
By Jose Eduardo Hernandez · REALTOR®, KW Commercial · Nov 2026
Many small businesses lease through an LLC with few assets. If it closes, the lease may be worth little unless you've built in protection.
- Personal guarantee: the owner promises to cover the rent if the business can't. A full guarantee is strongest; a "good guy" guarantee limits the owner's exposure if they give notice and leave the space clean.
- Security deposit: a larger deposit for a newer or riskier tenant.
- Letter of credit: a bank guarantees payment up to a set amount.
- Limited guarantee: coverage that steps down after a few years of on-time rent.
Match the protection to the risk and to how much you're investing in the space. The more TI and free rent you give, the stronger the protection should be.
Have a real estate attorney review the language. The wording of a guarantee decides whether you can actually collect on it.
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General information for Illinois owners, buyers and sellers, not legal, tax or lending advice. Every property and lease is different; talk with an attorney, accountant or lender about your situation.