Personal Guarantees and the Potential Consequences of Giving Them
Checklists
This checklist provides an overview of personal guarantees and what the consequences of giving them may be.
The Human Value of the Enterprise
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Personal guarantees or payment of the rent required from the company's owners
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Personal guarantees, such as a promise not to mortgage or sell property owned by the borrower, also are a form of side collateral and are worth only as much as the character of the borrower.
The directors of small companies are often asked by creditors to give their personal guarantees for company debts. A guarantee must be in writing and the guarantor can only be sued if the actual debtor can't pay.
Though such personal guarantees are more frequently required of new entities, some creditors may require them of even the most well-established businesses. This is especially true of organizations attempting to secure certain credit cards and loans.
If for example, a business goes bankrupt an owner with limited liability will not lose unrelated assets such as a personal residence (assuming they do not give personal guarantees).
 See also: Mergers, Acquisitions, Banks, Smith, Financial risk
  
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