When the borrower is a company
When the down payment is small
When the property’s income is recent
What a personal guarantee is
You answer for the debt with personal assets. The property alone is no longer the only security.
When it is required
- When the borrower is a company
- When the down payment is small
- When the property’s income is recent
- On almost every private loan
What can be negotiated
A guarantee can be capped at an amount. It can also end after a few years.
What the lender can seize
A personal guarantee reaches your assets, beyond the financed property.
Your other properties, investments and accounts can be targeted.
Limits to negotiate
- A dollar cap, rather than unlimited
- A period after which it ends
- A release once the ratio reaches a threshold
- A split between partners, pro rata to shares
The partner case
Without a written split, each guarantor can be pursued for the full amount.
What it changes in practice
It appears on your personal balance sheet as a commitment.
It therefore reduces your borrowing capacity for later projects.
Take that into account before multiplying acquisitions.
