Personal Guarantees: What You're Actually Signing
The PG is non-negotiable for SMB credit. But the form of the guarantee — joint vs several, limited vs unlimited, validity vs payment — has meaningful downstream consequences if the business fails.
Unlimited personal guarantee
You're personally liable for the full balance plus collection costs. Lender can pursue any personal asset not protected by state homestead law. Default standard at non-bank lenders.
Limited or capped PG
Liability is capped at a dollar amount or percentage. Common in larger SBA deals (sometimes capped at down-payment recoupment plus interest). Worth asking for on facilities over $500K.
Joint and several vs joint only
Joint and several means the lender can collect 100% from any single guarantor. If you have 2+ owners, push for several-only — caps each guarantor's exposure at their pro-rata share.
Validity vs payment guarantees
Validity guarantees only cover lender losses from misrepresentation (e.g., you reported revenue that wasn't real). Payment guarantees cover any default. CRE and asset-based facilities sometimes start with validity-only — far better for the guarantor.
Spouse guarantee
ECOA bars lenders from requiring a non-owner spouse's signature. If your spouse is being asked to sign and isn't an owner, push back — it's an enforceable rights violation.
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