• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Advertise
  • Submissions
  • About Us
  • Contact Us
  • Mar 4, 2021
  • Startup
    • Creating a Plan
    • Funding a Startup
    • Franchise Center
    • Getting Your Office Ready
    • Making Your Business Official
    • Marketing Your New Business
    • Personal Readiness
  • Run & Grow
    • Customer Service
    • Human Resources
    • Innovation
    • Legal
    • Operations
    • Risk Management
  • Leadership
    • Best Practices
    • Communication
    • Green Initiatives
    • Open Culture
    • Strategic Planning
    • People Skills
  • Sales & Marketing
    • Advertising and Lead Generation
    • Marketing Innovations
    • Marketing Plans
    • Online Marketing
    • Relationships
    • Sales Activities
  • Finance
    • Budgeting and Personal Finance
    • Payments and Collections
    • Tax and Accounting
    • Pricing Strategy
    • Working with Investors
    • Working with Lenders
  • Tech
    • eCommerce
    • Hardware
    • Software
    • Security
    • Tech Reviews
    • Telecom
  • Shop

SmallBizClub

Helping You Succeed

efile4biz banner
Home / Finance / Working with Lenders / How to Negotiate a Personal Guarantee
How to Negotiate a Personal Guarantee

How to Negotiate a Personal Guarantee

1943 Views

Jun 13, 2013 By Chris Barnes

Personal Guarantees are a part of doing business. You need a loan, you seek a loan, and the lender requires a guarantor to sign the loan agreement. There are no ways around this. However, there are ways to negotiate a deal so that your personal assets are not entirely at risk of being liquidated given the case that the loan is not repaid on time. I recently read an article by James Coughlin who offers some tips on how to negotiate your way through the process when personal guarantee when this comes up:

 

Review Everything in Writing: don’t be intimidated by what may be a lengthy, wordy contract. Take a close look at before signing, and pay particular attention to language that may implicate your personal assets in the event of a default. 

 

Trust Your Cosigner: if signing a typical “joint and several” Personal Guarantee Agreement, you cannot assume that the risk is spread evenly amongst cosigners. Typically the lender has the right of recuperation from whichever partner has the most liquid assets. Be careful not to end up on the wrong end of the stick.

 

Calculate Your Risk Tolerance: As a general rule, you don’t want to have more at stake that what you can afford to lose. Make sure that either you’re really confident that the loan will be repaid or you are not risking too much in the case of default.

 

Negotiate the Terms: Choose what aspect of the loan you want to negotiate and pursue that. You may negotiate down the loan so that there is no unconditional or unlimited guarantee on your end or so that the liability is spread according to ownership stake in the company. You may also ask for relief from the guarantee after a period of repayment or after some positive momentum in the financials of the company. 

 

Never Close the Door on Negotiation: You can always approach the bank after the loan has been signed to renegotiate any unfavorable terms, particularly after there has been a substantial shift in the financial standing of the company. 

 

Your success in negotiating a Personal Guarantee will largely depend on the financial standing of your business. When in doubt over the favorability of the terms you’ve been given, seek counsel from an attorney or accountant before settling.

Filed Under: Working with Lenders Tagged With: Business Documents, Finding Capital, Investors and Lenders, Relationships, Risk Management

Chris Barnes

Chris Barnes

Chris Barnes is the Director of Business Development at Tarkenton Companies, with a sales and marketing background in a wide range of industries, from sports information to insurance marketing. A jack-of-all-trades, Chris has experience in many aspects of daily and strategic operations for small business.

Related Posts

  • Here’s Your Guide to Choosing 3rd-Party Risk Management Tools
  • 5 Legal Documents You Absolutely Need for Starting a Small Business
  • 5 Keys To Negotiating Your Fair Share Of Any Startup

Primary Sidebar

bottom line ad

Random

3 Tips to Take Your Blog to the Next Level

Mar 4, 2021 By Becky Wilson

Managing Remote Teams: 6 Ways To Increase Motivation

Mar 4, 2021 By Igor Zagradanin

Why Cryptocurrency is So Appealing to Young Traders

Mar 4, 2021 By Philip Piletic

How to Incorporate Data Visualization on Your Website

Mar 4, 2021 By Eleanor Hecks

Please don’t overestimate your audience’s knowledge

Mar 4, 2021 By Dave Berkus

Footer

About Us

Small Biz Club is the premier destination for small business owners and entrepreneurs. To succeed in business, you have to constantly learn about new things, evaluate what you’re doing, and look for ways to improve—that’s what we’re here to help you do.

  • Facebook
  • LinkedIn
  • RSS
  • Twitter

Copyright © 2021 by Tarkenton Institute, Inc. All Rights Reserved | Terms | Privacy