A personal guarantee is a promise to pay a business debt yourself if the company cannot pay it. The Cooney Law Offices helps Pittsburgh business owners with drafting and reviewing business contracts before they sign, since the terms are rarely as fixed as a lender or landlord suggests.
What Does a Personal Guarantee Put at Risk?
A PA business loan personal guarantee steps around the protection your LLC or corporation normally provides. If the business defaults, the creditor can come after you directly in several ways:
- Your bank and investment accounts can be garnished.
- Real estate titled in your name alone can carry a judgment lien.
- Vehicles and other property in your name can be sold.
The same exposure applies to commercial leases. An Allegheny County commercial lease review should cover the guarantee page as carefully as the rent terms.
Are Personal Guarantee Terms Negotiable?
Lenders and landlords often present guarantees in standard forms, but many accept changes. The most useful requests include:
- Dollar cap: Set a maximum amount or percentage of the debt you will personally cover.
- Sunset clause: End the guarantee on a set date or after the business meets agreed payment or revenue targets.
- Limit on shared liability: Limit each owner’s responsibility to an agreed-upon percentage so that no single person bears the entire debt.
- No spouse signature: Keeping your spouse off the guarantee may preserve Pennsylvania’s protections for property you own as tenants by the entireties.
The worst a creditor can say is no. Asking costs little compared with signing an open-ended promise.
Guaranty of Payment vs. Collection Under PA Law
Under Pennsylvania law, a guaranty of payment generally lets a creditor sue you without first trying to collect from the business. A guaranty of collection forces the creditor to go after the company before you.
Collection wording is one of the most useful changes to request. Without it, enforcing a personal guarantee in Pennsylvania can start in the Allegheny County Court of Common Pleas the moment the business defaults.
Watch for Confession of Judgment Clauses
Many Western Pennsylvania guarantees include a confession-of-judgment clause. Under Pa.R.C.P. 2950, these clauses are barred in consumer transactions but permitted in commercial transactions.
Signing one lets a creditor enter a judgment against you through the county’s Department of Court Records without a trial or hearing. You then have a short window, usually 30 days after notice, to ask the court to open or strike it. Ask to remove or limit the clause.
Why Owners Call Our Pittsburgh Business Contract Lawyer Before Signing
A marked-up draft is far easier to change than a signed guarantee. Call The Cooney Law Offices at 412-546-1234 or schedule a consultation online so our Pittsburgh business contract lawyer can review the document while the terms are still open. We serve owners throughout Allegheny County and the nearby counties of Beaver, Butler, Washington, and Westmoreland.
