When you personally guarantee a business loan, you promise to repay it yourself if the company cannot, and the lender may reach your savings and your home equity. Sorting out what that promise truly covers is daily work for our Pittsburgh business attorneys at The Cooney Law Offices.
What Is a Personal Guarantee?
A personal guarantee is a separate written contract, signed by you as an individual, that backs a loan made to your business. Its wording, rather than the loan amount, is what controls how far your personal exposure reaches:
- Scope of the covered debt: most forms capture the original balance plus renewals, later increases, and collection costs.
- Continuing coverage: many forms keep backing new advances the company takes until you revoke the promise in writing.
Joint and several wording warrants the same close attention. A lender holding it may collect the entire balance from whichever owner has the most reachable assets, leaving that person to pursue the other owners for contribution.
Common Forms of Personal Guarantees
Pittsburgh lenders use a variety of personal guarantee agreements, and the title of the document often reveals little about your actual liability. The two most common types differ significantly in the amount of personal exposure they create:
- Unlimited (or Unconditional) Guarantees: The guarantor is responsible for the full debt, including interest, fees, and collection costs. Small Business Administration (SBA) loans often require this type.
- Limited Guarantees: Liability is capped by a dollar amount, percentage, time period, or another agreed limit.
- Joint and Several Guarantees: Each guarantor can be held responsible for the entire debt if the others do not pay.
- Continuing Guarantees: The guarantee applies to ongoing credit, future loans, or business credit accounts until it is revoked or expires.
- Specific Transaction Guarantees: The guarantee applies only to one identified loan or financial obligation.
Springing and validity forms sit between those poles. They trigger personal liability only on defined conduct, such as fraud or an unauthorized transfer of collateral, and lenders often ask a spouse to sign as well.
What Happens If the Business Defaults?
Co-signing and guaranteeing often sound interchangeable, and Pennsylvania law frequently treats them similarly. Under 13 Pa.C.S. § 3419, a person who signs to support another party’s obligation may be held liable even without receiving anything of value. Once a default occurs, two things typically happen:
- Acceleration and demand: the lender declares the whole balance due and sends the demand to you personally, not to the company.
- Confessed judgment: where the document holds a warrant of attorney, a creditor may have judgment entered by the Allegheny County prothonotary.
Nearly every commercial guarantee signed in Pittsburgh is a guaranty of payment rather than a guaranty of collection, so the lender may sue you directly without first suing the business or selling its collateral. Claims of that kind sit in the Allegheny County Court of Common Pleas.
Bring Your Guarantee to The Cooney Law Offices
A demand on a personal guarantee is not the end of the conversation, because your document’s wording, the lender’s conduct, and the condition of the collateral all shape what you truly owe.
Our firm, The Cooney Law Offices, brings battle-tested counsel and years of litigating business disputes to owners across Allegheny County. Call (412) 546-1234 or book a consult for a straight read on what your signature exposed.
