Some Issues to Consider Before Giving a Personal Guaranty for Business Debt
At one time or another, most businesses have to get a loan. Many times, a lender will require a business's key individuals - such as owners and officers - to personally guarantee repayment of the loan. Giving a personal guaranty should not be taken lightly. Doing so exposes the guarantor to the possible loss of their personal assets to the creditor's claims if the company does not pay the debt.
Basically, a personal guaranty provides the lender with the right to make a claim directly against the guarantor, whether or not the lender sues the company. The lender can sue the guarantor even if the company goes into bankruptcy. Although bankruptcy may provide certain protections to the company, these kinds of protections may not be available to personal guarantors.
Often times, entrepreneurs may feel like they have no choice but to go along with the terms demanded by a lender, including giving personal guaranties. But, given the profound effects giving a personal guaranty can have on an entrepreneur's personal finances, a Michigan business person should always obtain sound legal advice and counsel from an experienced Michigan business attorney before giving a personal guaranty.
