{"id":4787,"date":"2023-10-09T14:04:11","date_gmt":"2023-10-09T14:04:11","guid":{"rendered":"https:\/\/www.mcashadvance.com\/?page_id=4787"},"modified":"2025-05-23T11:40:16","modified_gmt":"2025-05-23T15:40:16","slug":"mca-personal-guarantees","status":"publish","type":"page","link":"https:\/\/www.mcashadvance.com\/resources\/mca-personal-guarantees\/","title":{"rendered":"MCA Personal Guarantees: What You Need to Know"},"content":{"rendered":"\n
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By Richard Wilson<\/a><\/p>\n\n\n

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Last Updated on<\/p>\n\n<\/div><\/div>\n\n

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<\/i> Estimated read time: 7 minutes<\/p>\n\n<\/div><\/div>\n<\/div>\n<\/div>\n<\/div>\n\n

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Merchant cash advances (MCAs) are often described as unsecured funding. You don\u2019t put up collateral like property or equipment. But that doesn\u2019t mean you\u2019re off the hook if your business can\u2019t pay it back.<\/p>\n\n\n\n

In many MCA agreements, you\u2019ll be asked to sign a personal guarantee. This is a legal promise that if your business fails to repay the MCA, you will. It gives the provider a way to recover funds by holding you, not just your business, personally responsible.<\/p>\n\n\n\n

We\u2019ll walk you through what that means, when it applies, and how to protect yourself before signing.<\/p>\n\n\n

Personal Guarantees Explained<\/h2>\n\n\n

A personal guarantee is a legal commitment to repay your business\u2019s MCA balance using your own personal finances. If your business fails to repay the advance, the provider can pursue your assets to recover the remaining amount.<\/p>\n\n\n\n

Even if your business is set up as a limited company or LLC, signing this clause bypasses those protections. You\u2019re now responsible, not just your business.<\/p>\n\n\n

Why Providers Include Guarantees<\/h2>\n\n\n

MCAs carry higher risk for providers. They\u2019re not backed by physical collateral, and repayments depend on your revenue. A personal guarantee shifts some of that risk onto you. It lets the provider collect directly from your accounts, savings, or assets if your business defaults.<\/p>\n\n\n

Who Signs the Guarantee<\/h2>\n\n\n

Usually, the primary business owner signs. But if your business has multiple owners, the provider may require all of you to sign. These are called joint or proportional guarantees.<\/p>\n\n\n\n

If you\u2019re a minority shareholder or investor, check whether your signature creates personal liability. Don\u2019t assume you\u2019re exempt.<\/p>\n\n\n

The Two Main Guarantee Types<\/h2>\n\n\n

There are two types of personal guarantees most commonly included in MCA agreements.<\/p>\n\n\n

Unlimited Guarantees<\/h3>\n\n\n

You\u2019re personally liable for the full outstanding balance, including late fees, legal costs, and penalties. If the business defaults, the provider can sue you directly.<\/p>\n\n\n

Limited Guarantees<\/h3>\n\n\n

Your liability is capped, often based on your ownership share. For example, if you own 25 percent of the business, you may only be liable for 25 percent of the unpaid balance.<\/p>\n\n\n\n

Always confirm which version applies before you sign.<\/p>\n\n\n

What Happens After Default<\/h2>\n\n\n

If your business fails to repay the MCA, and a personal guarantee is in place, here\u2019s what the provider may do:<\/p>\n\n\n\n