Personal Guarantee (Self-funded search)

by a searcher from Harvard University - Harvard Business School

4 years ago

Are there ways to avoid a personal guarantee if pursuing a self-funded search? Have heard there is an EBITDA threshold - wondering if that is true and if there are any other considerations. Thanks!

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10 comments

lender from University of Missouri - Columbia

The main question is the value of a business without the owner. The reason middle market businesses (i.e. $5MM+ in ebitda) Don’t often require PGs is because the business is large enough to have value. Most small businesses need an owner at the helm or they start to deteriorate quickly. So most small businesses will require a PG, especially on a cash flow basis. There are options out there for no PGs but the costs traditionally make them unattractive

4 years ago | like reply | 2 likes

searcher from The University of Auckland - The University of Auckland Business School

There used to be PG insurance in the US. They still have it in the UK. Some searchfunders were working on a new product recently, not sure if they got a result. Huge gap in the market here for insurers. Purchasers would pay huge fees to avoid PG liability.

4 years ago | like reply | 0 likes

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