Last week, I ended on the subject of finances for small business owners. As a small business attorney based in Denver, I work with small businesses everyday that have many of the same questions. One of the biggest ones is do I have to personally guarantee a loan? And the thought process that goes with the question is “I started a small business to protect my assets, by personally guarantying the loan, don’t I put my assets at risk?” And the answer in many cases is yes, you do either incorporate or start an LLC to protect your personal assets; however, in many cases it is because you did just that that another party wants the personal guarantee.
A personal guarantee ensures the other party that you are willing to risk your assets in the startup or continued day-to-day operations of your business. In many cases, a third party will not sign a contract with a new company without the personal guarantee because if the owner of the company isn’t willing to risk his or her assets, the third party is definitely not willing to risk anything. However, when you, as a small business owner, is asked to sign a contract with a personal guarantee, you should always have the contract reviewed by a Denver small business lawyer such as myself. Your business attorney can help you determine whether the contract is one that you can sign and can help point out potential areas that you may want to negotiate prior to signing.
If you are a business owner in need of a small business lawyer in Denver to review a contract for you, please contact me at 720-258-6647 or Elizabeth.Lewis@eclewis.com.