A personal guarantee is a contractual promise to repay your company’s loan or line of credit. Many founders put up personal collateral when applying for a business loan or credit card. Lenders are prepared to extend credit to debtors with personal guarantees because they believe the founders will use the funds to grow their enterprises.
Since signing a personal guarantee gives the lender the right to seize assets in the event of nonpayment, it is important to avoid entering into such an agreement. This is why picking the appropriate form of guarantee is so important.
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