Never Give Personal Guarantee

Much of the protection which can be accomplished with a corporation will be lost if you give a personal guarantee of a corporate obligation. Many of the problems which we see in our practice are caused directly by needless guarantees for corporate loans and leases for business ventures which were not successful.

We have found, in our practice, that a lender or a lessor will generally not require a personal guarantee if he or she can be persuaded that the business or proposed venture is sound. These days, lenders are anxious to make good loans and lessors want to lease empty space. If you cannot convince them that your company is going to be successful and that they should rely solely on the business for payment, you should not enter into a deal with them.

If you get turned down too many times, perhaps you are not being realistic about your prospects for success. Maybe your business plan is not really as good as you think. If you sign a personal guarantee, you are placing all of your assets at the mercy of a particular business deal and you are undertaking a risk with odds much worse than those offered in most gambling casinos.