What is Personal Guarantee (PG)?
The Short Answer
Personal Guarantee (PG) explained simply
When you sign a Personal Guarantee (PG), you are telling a lender that if your business can’t repay a loan, you will pay it back using your personal assets. This is common for small business loans because lenders want extra assurance. It reduces the risk for the lender, making them more likely to approve the loan.
Real-World Example
The Coffee Shop Loan
Imagine you own a coffee shop and need a $100,000 loan to buy new equipment. The bank asks for a Personal Guarantee. You sign it. If your coffee shop struggles and can’t make loan payments, the bank can come after your personal assets, like your house or car, to get their money back.
Why this matters
A Personal Guarantee can help you get financing for your business, but it also puts your personal assets at risk. Understand the terms before you sign. It’s a big commitment.
Always try to negotiate the terms of a Personal Guarantee. Sometimes you can limit the amount you are personally guaranteeing or even get it removed after a certain period of on-time payments.
Always try to negotiate the terms of a Personal Guarantee. Sometimes you can limit the amount you are personally guaranteeing or even get it removed after a certain period of on-time payments.
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