Most surety deals for privately held companies require the personal guarantee of business owners, similar to bank credit. When a business gets larger and stronger financially, personal guarantees may be eliminated at some point. Keep in mind, however, that a surety is also an unsecured creditor, so the surety is in many ways taking more risk than a banker.
As an unsecured creditor, they will expect the business owner to demonstrate their commitment to the bonded obligations by signing personally. From the surety’s standpoint, the real value of a personal guarantee is keeping the business owner “at the table” during any difficult times that may threaten the business. The last thing a surety wants is the business owner to hand over the keys to the business and tell the surety… “have fun.” Personal guarantees are effective in preventing this scenario.
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