The Personal Guarantee on Your MCA: Five Things to Know Before Enforcement

The Page in the Stack That Followed You Home

You guaranteed this debt yourself, in your own name, whether or not you remember the page. The guarantee sat somewhere in the middle of the signing stack, between the ACH authorization and the fee schedule, and the broker presented it as standard, routine, the sort of clause no funder bothers to enforce. Funders enforce it. A personal guarantee is a separate promise, given by you as an individual, to satisfy the advance when the business cannot. It converts a commercial obligation into a personal one, and the conversion deserves to be taken at full weight.

Where the Guarantee Reaches

Scope comes first. Under a personal guarantee, a business default permits the funder to pursue what belongs to you rather than to the company: personal bank accounts, real property, vehicles, and in some states a share of your wages. The corporate veil does not cover debts guaranteed in your own name. You signed that protection away at closing, in all likelihood without reading the clause that did it.

None of this makes enforcement automatic. Before a single personal asset moves, the funder must hold a judgment against you as an individual. In states that still honor confessions of judgment, the conversion from default to judgment arrives with unsettling speed. Elsewhere the funder must file a lawsuit, serve you, and prevail in court. The gap between default and personal collection is the room in which settlement is negotiated, and the room is smaller than it appears from the outside.

Limited Versus Unlimited Guarantees

The second thing to settle is which document you signed. A limited guarantee caps your exposure at a stated dollar figure. An unlimited guarantee names no ceiling at all, and most owners cannot say, from memory, which version carries their signature. The difference decides how much of your personal balance sheet a default can reach.

Pull the agreement from wherever it landed after closing. Find the guarantee provision. A stated maximum means your exposure has a roof. Without one, the funder may pursue the entire outstanding balance, then the fees, then the legal costs, then whatever the confession of judgment authorized on top of all of it. I have reviewed agreements in which the guarantee, once the accelerated fees and penalty provisions were computed, reached three times the original advance. The drafting was not an accident.

The figure in the guarantee and the figure you owe can differ; expect the funder to demand the larger one.

The Judgment Requirement

The third item is procedural, and it shelters you more than most owners credit. A guarantee, standing by itself, is a promise on paper; before your accounts or your house can be reached, a court must convert that promise into a judgment. New York amended CPLR Section 3218 in 2019 to bar confessions of judgment against out-of-state defendants, which leaves the funder there with an ordinary lawsuit: service of process, an answer period, a hearing if you choose to contest the claim. Why so many owners spend that window doing nothing is a question worth sitting with. The window is the asset.