Funding situations

Personal guarantees in business funding: what you are agreeing to.

Most funding to a small business asks the owner to stand behind it in some form. The form differs by product.

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✓ Checking what you qualify for does not affect your credit score.

The short answer

At Merchant Fund Express, here is the short answer: Most funding asks for a guarantee in some form: repayment for lines and loans, often performance for advances. Read what triggers it.

Across products

Product	Typical guarantee
Line of credit	Guarantee of repayment is common
Term loan	Guarantee of repayment is common
Merchant cash advance	Often a guarantee of performance, with specific triggers

What to read

What triggers it

What amount it covers

Whether it survives payoff or termination

Whether it names collateral beyond the business

Reducing exposure

Ask for the narrowest form

Keep the account and the debits working

Notify the funder of any change in banks or processors

Have an attorney review before signing

See MCA personal guarantee and glossary.

In practice

An owner reviews a term loan guarantee of repayment and an advance guarantee of performance. She notes that the first covers the balance and the second is triggered by specific acts. She keeps the account open and notifies the funder of any change. Understanding the form changed how she managed both.

Source: Merchant Fund Express.

Common mistakes to avoid

Not reading the triggers

Assuming all guarantees are the same

Not notifying the funder of changes

Not asking for the narrowest form

Keep reading

Personal Guarantee — What a personal guarantee covers and what triggers it.

Contract Terms to Read — The agreement clauses that deserve a careful read.

Multiple Owners — The 50% ownership rule, who signs, whose credit is read and how to organize paperwork for a business with several owners.

Funding Situations — Find the page that matches your funding situation.

Funding requirements —

Defaulted Advance — How a prior default is read, what the published tiers say and what resolution looks like.

Many Inquiries — How a cluster of recent credit inquiries is read, why shopping for funding can look like desperation and how to apply without piling them up.

MCA Guide — Every MCA question we publish, organized.

Common questions

Is a guarantee always required?

Most products ask for one in some form. Source: Merchant Fund Express.

Does it hit my credit?

It does not report on its own; a collection or judgment would.

Can I negotiate?

Sometimes.

Does it end at payoff?

Agreements vary; confirm.

See what you qualify for

Merchant Fund Express gives a same-day decision. Applying takes a few minutes and will not affect your credit score.

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