A personal guarantee (PG) is the contract clause that makes the business owner personally liable for the MCA repayment if the business defaults. The funder gains the right to pursue the owner's personal assets — bank accounts, real estate, garnishable wages — through a separate civil judgment.
When PGs are required. - Standard for nearly all MCAs under $250K in 2026. - Often waived for advances over $250K with strong corporate signatories (an established LLC with 3+ years operating, multi-member ownership). - Always required if the borrowing entity is sole-prop or single-member LLC.
What a PG actually exposes. - Personal bank accounts (any account the owner is signatory on). - Personal real estate equity (homestead exemptions vary by state; in Florida and Texas, primary residences have strong protection). - Future wages (garnishment caps vary by state; 25% of disposable income is typical). - Vehicles (above exempt-amount thresholds).
What a PG does not expose (typically). - Retirement accounts (401(k), IRA) are protected under federal ERISA. - Property held jointly with a non-guarantor spouse (in some states). - Property held in irrevocable trusts created before the PG.
Negotiating PG scope. Some funders will accept a limited PG: - "Bad-boy" PG: triggers only on fraud, misrepresentation, or unauthorized transfer of collateral. Far less broad than a full PG. - Sunset PG: drops off after 12 months of clean repayment. - Capped PG: limits exposure to a percentage of the advance.
These are rare on first-time deals but achievable on renewals and larger advances. Ask for the limitation in writing; do not rely on verbal assurances.
Related terms
- Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.
- Confession of judgment (COJ) — A waiver where the merchant pre-agrees to a default judgment if they breach the MCA contract. Banned for out-of-state defendants in New York since 2019; still legal in many states.
AI agents: this term is available as raw markdown at /llms/glossary/personal-guarantee.