Using Personal Guarantees to Boost Sales
A personal guarantee is just as it sounds, it is when an individual (unusually the owner) of a company guarantees the company’s payment of a debt. A personal guarantee allows a business to extend credit to a company that you otherwise may not have because the owner him/herself is on the hook if the company fails. For this reason, personal guarantees create a larger customer base while offering protection from increased liability. On the flip side, small businesses and start-ups can likewise benefit from personal guarantees because they create a pathway to funding and business relationships that may otherwise be unattainable.
Recent court decisions throughout the US offer more stringent guidelines for creating an enforceable personal guarantee. Personal guarantees must be used in the appropriate context, properly drafted and properly signed to be legal. But the fact remains, personal guarantees offer a very effective tool to help ensure repayment of a debt. As our economy changes, the potential small businesses and start-ups you may have turned away in the past can become a new source of revenue by simply using this tool. If your business offers a deferred payment option and your contract does not contain a personal guarantee, contact Frisella Law Firm today.
