For your small business owner clients, signing a personal guarantee has become standard practice as part of the commercial loan approval process. While this is often the price of doing business, what does a personal guarantee (PG) really mean? What, if anything, can your clients do about them?
A PG gives the bank permission to go after personal assets should the business default on the loan. In addition to letting lenders pursue personal assets, many allow the PG to be called for things like technical default, additional borrowings, a sale of assets, death, or incapacitation. Some even allow the lender to obtain additional collateral on demand if the lender determines the loan to be undersecured.