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The Infamous Personal Guarantee
One of the most common objections we hear about is the need for a personal guarantee. A common argument is that the company principals want to maintain “separate finances” as advised by their CPA. Invariably, this is most commonly a concern when the company guarantors have less than perfect credit. Ultimately, the solution to this issue depends on the specific parameters of each situation.
1. Maintain Separate Finances: Contrary to popular belief, the personal guarantee does not intermix personal and business finances. The lease will not appear on the guarantors’ credit report, and thus will not adversely affect their debt-to-income ratio. In its simplest form, the PG obtains the promise of each company principal to fulfill the terms of the lease, in the event of a company failure. If you are planning to stay in business, this should not be an issue.
2. Hide Poor Personal Credit History: This is extremely common. Many business owners feel that by using the “tax id number” of their company, they can avoid the exposure of their personal credit. Although this may be possible, full-disclosure is the best way to achieve lease approval. We have a number of corporate only solutions, but they are often reserved for companies that meet rigorous credit standards. We can work with poor credit, even if you have had a previous bankruptcy, repossession, judgment, or foreclosure.Comments (0) 28.06.2008. 08:46