In most cases, yes, a merchant cash advance (MCA) will require a personal guarantee from the business owner or owners. A personal guarantee is a legal agreement that makes the business owner personally responsible for repaying the MCA if the business is unable to do so.
Because MCAs are typically considered high-risk financing options, lenders often require a personal guarantee as a way to mitigate their risk. By requiring the business owner to personally guarantee the loan, the lender has a way to collect repayment if the business fails or is unable to pay back the loan.
It’s important for business owners to carefully review the terms of any MCA agreement before signing on, including the personal guarantee clause. It’s also advisable to consult with a financial advisor or attorney to fully understand the potential risks and implications of signing a personal guarantee.
[…] on the lender, you may need to provide collateral or a personal guarantee. Collateral can be assets like real estate or equipment, while a personal guarantee involves your […]
[…] always be prepared for the possibility that you may have to fulfill your obligation under the personal guarantee. Having a plan in place can alleviate some of the stress associated with such […]