Many guarantors are under the false impression that a bank can call on a personal guarantee only after all other avenues of recovering the debt have been exhausted – such as selling the business and its assets.
Banks have the right to call on a guarantee as soon as a borrower defaults. That’s just one missed payment.
It’s up to the bank to decide whether to seek to recover their debt from the assets of the business before looking to the personal guarantors for any shortfall.
Know what you’re getting into
If you’re being asked to give a personal guarantee, speak to us before signing anything.