Personal Guarantees on Business Financing
Many MCAs and business loans include a personal guarantee or 'validity guarantee.' Knowing what you signed helps you understand your exposure.
Types of guarantees
A full personal guarantee typically makes the owner personally responsible if the business doesn't pay. Many MCA agreements instead use a 'performance' or 'validity' guarantee, where the owner guarantees the business will follow certain contract terms (such as not diverting receivables) rather than guaranteeing repayment outright. The difference matters — and depends on the exact wording.
Why it matters when exploring relief
When evaluating settlement, restructuring, or refinancing, ask how each option affects any guarantor. A written agreement resolving an obligation should address whether guarantors are released.
Common questions
Helpful next reads and tools
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