What a Personal Guarantee Does for You

A personal guarantee doesn't just give you a backup target for collection. Here’s how it changes the
entire dynamic of the transaction:

It shifts risk. The owner has skin in the game. When someone's personal assets are on the line, they're far more likely to prioritize your invoice.

It strengthens your collection position. If the business defaults and you need to pursue recovery, you have two avenues instead of one. You can go after the business and the individual.

It discourages strategic default. Some businesses dissolve and restart under a new name to escape debts. A personal guarantee closes that loophole.

It improves your leverage in negotiations. If an account goes past due, the guarantor has a strong incentive to work out a payment plan rather than risk personal exposure.

When Should You Require One?

Not every customer needs to sign a personal guarantee. But there are situations where you should make it non-negotiable:

• New customers with no credit history — before you extend any meaningful credit, get a guarantee.
• Small or closely held businesses — especially LLCs where the owner is the business.
• Larger credit limits — the more you're extending, the more protection you need.
• Customers who've been slow to pay in the past — if they've already shown signs of trouble, don't extend more credit without a guarantee.
• Customers in volatile industries — sectors with high failure rates deserve extra scrutiny.

Learn more in our latest article.

Need Help with Commercial Debt Collection?

We've spent over 50 years helping businesses recover what they're owed. If you have questions about personal guarantees, credit policies, or an account that's already past due, we're here to help.

For a no-obligation consultation about commercial debt collection, call us at (248) 370-8160 or click here to submit a contact form.