The problem with a personal guarantee is that the lender will always take everything they possibly can, and a personal guarantee leaves no boundaries. It makes it impossible to start up without risking fundamentals of life like housing and transportation, and almost definitely leads to bankruptcy in case things go south. This is OK for some people in the 18-25 age range when they can just go move back in with Mom, but it doesn't work for people with families, people without a safety net, etc.
Your lender is not risking his house to loan your company money and you shouldn't risk your house either, especially if you have a family. It's not so easy to start over once you get married and have a couple of kids, and it's not worth risking getting thrown out on the street if it means your children are going to be sleeping in the gutter.
yeah, they say that if you work for someone who puts their own money in to the business you have an insane boss.
On the other hand, this is how most small businesses owners I've met did it. Most of us lack the connections to get people to give us money on "eh, if it doesn't work out, we forget about it." terms.
Hell, try to get any kind of lease as a small company without personally co-signing. "If you don't believe in your company, why should I?" is something that more than one landlord has told me.
So yeah, while you could say it is insane, it's also quite difficult to get a company off the ground without accepting some personal liability on the downside.
the 'safety net' that saved me from bankruptcy (and bankruptcy will save your children from sleeping in the gutter) was personal earning power; in '06-early '07, when my company was deeply in the hole, I found a body shop willing to do corp-to-corp and turned myself out. I worked for other people until the debit was paid off[1].
The other side of that is when you think about what 'deep in debit' means, you should calibrate that to your own personal earning power. This is easier than it sounds; it's hard to get people to loan you more than you can reasonably pay back. Your creditors fear your bankruptcy more than you do.
From what I've seen, starting a failed business does not decrease your earning power. I know I'm a more valuable employee now; aside from the technical skills I've obtained, I now understand a lot more of what the boss actually wants. (unfortunately, most of that knowledge only applies to small companies. Large corps, it seems, operate under different rules, rules I still do not understand.)
[1] I ended up deciding not to shut down the company, so I continued the arrangement until the company was making enough money to pay me a living wage.
Your lender is not risking his house to loan your company money and you shouldn't risk your house either, especially if you have a family. It's not so easy to start over once you get married and have a couple of kids, and it's not worth risking getting thrown out on the street if it means your children are going to be sleeping in the gutter.