Understanding Personal Guarantees: Keeping Personal Collateral Separate From Your Business


When it comes to running a business, putting personal assets at risk for the sake of the company is a decision no one wants to make. In today’s economy, many lenders are trying to mitigate some of their own risk by mandating personal guarantees to qualify for business credit. Fortunately, there are strategies and tools that small business owners can use to get business credit without a personal guarantee.

A personal guarantee is signed by a key member of the business, such as an owner or officer. It reduces the lenders’ risk by laying a claim to the personal assets of the signee. In the event of a default, personal collateral could be sold to recover part or all of the loan loss.

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