What is a Personal Guarantee?
Liability on Business Loans and Credit Cards
When a business applies for financing, whether it be an unsecured loan, credit card, or line of credit, the underwriters will likely take a close look at the business' creditworthiness through agencies such as Dunn & Bradstreet and Experian. Unless a business is well established and demonstrates a track record of strong long-term profitability, the lender may decline the loan, unless the business owner has strong credit and is willing to sign a personal guarantee. Similarly, oftentimes when we review the evidence for a lawsuit for merchant cash advance, the contract almost always includes a provision to provide for personal liability in the event of default.
By signing a personal guarantee, the business owner can be held personally responsible to repay the debt if the business defaults on it's repayment obligations. This could expose the guarantor to adverse collection notations on their consumer credit reports, collection calls, or even a lawsuit naming the guarantor as a Defendant.
Having a personal guarantee is a valuable tool to the creditor. If the assets of the company are insufficient to repay the debt, or difficult to liquidate, the creditor may attempt to recover the balance in full from the personal guarantor.
Being sued for a loan with a personal guarantee?
Our New York City lawyers provide aggressive business loan debt defense. We can work with you to identify the applicable affirmative defenses, counterclaims, and to make sure that an Answer is filed timely to avoid a default judgment. Where appropriate, we can work towards negotiating a reasonable reduction to settle the personally guaranteed business debt.
Get in touch with us today to schedule your complimentary initial case consultation with our experienced business loan lawyers. Call the Law Office of Simon Goldenberg, PLLC today!
