Breaking the Chains: Why Are Incorporated Businesses Still Tethered to Personal Guarantees? 🤔

Signing a personal guarantee is a serious financial commitment and should be approached with caution.

A personal guarantee essentially means that you are personally responsible for the debt or obligation of another person or entity.

Before you sign, ask yourself these questions:

• How often are you asked to give a personal guarantee, co-sign or give out your personal SIN number to a supplier?   
•  If your business is incorporated (not a sole prop), then why are you saying “yes”? 
• Are you paying your suppliers on time?
• Is your business is making profit?
• Why did you incorporate your business?

It’s time to “Push back”

When suppliers ask for your personal guarantee, they are basically telling you that “they don’t trust your business will pay them back or on time”

When to Sign a Personal Guarantee?

• Business Loans – If your business is a “Startup” it will not have any established credit history – banks & suppliers might request it to secure financing
• Real Estate Transactions: If you are purchasing a property or new building through a HoldCo
• Joint Ventures or Partnerships: if you are entering into a business partnership and financing is required
• Non-Profit Organizations: If you are involved on the board that is seeking financing, lenders will likely require it

Don’t forget!

Many business owners were required to give out their personal information and have signed a Personal Guarantee when they started their business, HOWEVER, most have forgotten to REMOVE the personal guarantee many years later.  

I have personally seen cases where the incorporated business changed & went bankrupt and “Your” name was stilled “attached” to the business.   You are now still guaranteeing the business and will require to pay personally! 

If you want to learn how to stop giving out your personal info, contact me directly at: nathan@truehelm.ca