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 for the business owner to hand over the keys to the business and tell the surety to have fun. Personal guarantees are effective in preventing this scenario.
Contact me to discuss surety bonds.
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