How to get comfortable with a personal guarantee?

Member resources:

Frequent asked questions:

What is Searchfunder.com?

Searchfunder.com is an online community of searchers, investors, lenders, brokers and other professionals. Over 80% of those involved in searchfunds maintain a Searchfunder account to help them network, hire, and mentor others.

What are the benefits of membership?

In addition to accessing the most active online network of business buyers, Searchfunder licenses research that is simply not cost effective for individuals. Access over 15,000 industry reports and 50,000 transaction financials. You also get monthly credits for contact information for your company sourcing campaign with the option to purchase more at drastically discounted rates. Searchfunder has pre-purchased access from these data providers in order to empower individual buyers and to help searchers level the playing field versus private equity.

Do you have deals?

While we are primarily a buy-side network, we do have hundreds of brokers that regularly post deals to the community.

Can I find an internship on Searchfunder?

Absolutely! We have the industry's largest intern job board. If you are considering a search, the first step is to help another business buyer so you can hit the ground running.

What does it cost?

Searchfunder is a subscription service. We offer flexible monthly, annual and lifetime memberships.

Monthly

$79 / month

Annual

$19 / month

Lifetime

$432 / once

Those who maintain an account with us for over 4 continuous years are permanently added to the community without the need for a membership.

Do I need an MBA to join?

While a large number of our members come from dedicated programs at Harvard Business School, Stanford GSB, Chicago Booth, and other top programs, searching is no longer reserved for the elite. With the current abundance of dry powder in private equity, and an increasing number of business owners reaching retirement age, good deals rarely go unfunded.

Post a question, deal, job, etc...

Make a post...

Complete registration to post.

by a searcher from University of California, Hastings College of Law
in San Francisco, CA, USA

8yrs ago

How to get comfortable with a personal guarantee?

Can any seachers or lenders share their experience/thoughts on how a searcher can get comfortable with the personal guarantee on debt financing?

Despite our best efforts, sometimes deals can go bad. The personal guarantee can leave the entrepreneur with a lot of liability.

In addition, in theory, a searcher/entrepreneur could be fired out of their own company by the shareholders. That would leave the awkward situation of being liable under the guarantee but not having any operational control.

30 Likes

1,322 Views

reply by an investor 2yrs ago
from University of Illinois at Urbana in Chicago, IL, USA

This is a tough topic...If it's at all possible to avoid through patience of finding a deal where you can get a bigger seller note, raise more $, shop your loan, etc. try to do so. Maybe one of the lenders knows the industry stats, but if your deal goes sideways and the PG gets triggered, that's the only one that will matter. In a prior independent sponsor deal, company hit a tough patch, there was mezz and they didn't want to help. Can't say I blame them for that, but the only way to get the revolver to keep going was to sign a PG. As it started to look a little better, we were asked to move on. It took over 3 mos for the then "control" folks to get us off the PG. They ultimately did, but those 90+ days created a lot of stress and anger. So while it all worked out, the PG left a mark. Ironically, this topic happened to come up at a breakfast last week I had with a very successful investor. He shared that a top BK lawyer once told him when he was younger "Kid, you know what someone who signs a PG is? A fool with a pen. Don't be a fool..." I didn't tell him that I have one on a smaller-ish revolver at the moment : ) All that said, many get done and can be part of a successful transaction. I have a number of friends and colleagues who have done so, us included. Just understand what you are getting yourself into. Your partners and your spouses, if any.

reply by an investor 2yrs ago
from University of California, Berkeley in San Francisco Bay Area, CA, USA

The PG risk depends on the individual net worth. Lots of searchers have no significant net worth and shouldn't be worried about the PG. I things go bad and the borrower has no meaningful assets, the SBA will usually do a "offer of compromise" and just let the borrower of the hook without a bankruptcy proceeding. On the other hand, searchers who do have significant net worth should be very carful to evaluate the downside risk of signing a PE.

Unfortunately, the net result is that the SBA PG is "unfair" to later-career searcher who can't afford to lose everything due to having a house and needing to provide for family/kids etc. However, it is great for folks who don't have significant assets because there is de factor very little downside risk