Quick Summary
Yes. If you signed a personal guarantee, an MCA company can pursue your personal bank accounts, wages, and property when the guarantee is triggered. What triggers it, and how much it can reach, depends on the exact wording of your contract and the law where you live. An attorney can review your guarantee and look for ways to limit or challenge it. Get a free phone consultation with Tayne Law Group.
Most merchant cash advance (MCA) agreements include a personal guarantee. This clause can make you personally responsible for the debt if your business does not hold up its end of the contract.
Far too many owners overlook it because it is buried in dense legal language. They only learn what they put at risk once the business is in trouble. Here is how MCA personal guarantees work, what they can reach, and what you can do to protect yourself.
Struggling with your debt?
What Is a Personal Guarantee in an MCA?
A personal guarantee is a promise you sign as an individual, separate from your business. It lets the MCA company come after you directly if the guarantee is triggered, instead of collecting only from the business.
Guarantees come in two main forms. An unlimited guarantee exposes all of your non-protected personal assets. A limited guarantee caps your liability at a set dollar amount or to one advance.
When Does an MCA Personal Guarantee Get Triggered?
It depends on what your guarantee actually promises. Many MCA contracts use what is called a performance guarantee. Instead of promising to repay no matter what, you promise that the business will keep certain commitments, such as:
- Not switching bank accounts or blocking the MCA company’s withdrawals
- Not hiding or diverting sales
- Not taking another advance against the same revenue, known as MCA stacking
- Not closing or selling the business without notice
Other contracts are written more broadly and treat a missed payment, a default, or closing the business as a trigger. That difference matters. Reading your MCA agreement closely is the only way to know which kind you signed.
What Personal Assets Are at Risk?
Once a guarantee is triggered, the MCA company can try to collect from nearly any asset that is not protected by law. These may include:
- Bank accounts, including some accounts held jointly with a spouse or family member
- Wages
- Home equity, depending on your state’s exemptions
- Vehicles and other personal property
- Investment accounts
MCA companies often move fast and use aggressive collection tactics. Some contracts include a confession of judgment, which can let the MCA company get a judgment without a full court case. A judgment or reported delinquency can also hurt your personal credit score.
Can You Challenge a Personal Guarantee?
Yes, in many cases. A guarantee is only as strong as the contract behind it. You may be able to reduce or eliminate your personal liability if:
- The MCA company broke the contract or raised your payments without permission.
- The contract has predatory or unfair terms, or the deal is really a high-cost loan in disguise.
- The contract includes a confession of judgment New York does not allow, such as one signed by a business located outside New York.
- The MCA company used improper collection tactics.
- The MCA company claimed you defaulted but refused to adjust payments when your sales dropped.
| Type of guarantee | What you promise | What usually triggers it |
|---|---|---|
| Performance guarantee | The business will follow key contract rules | Breaking those rules, such as blocking payments or stacking |
| Limited guarantee | Repayment up to a set amount | A default, but only up to the cap |
| Unlimited guarantee | Full repayment of what the business owes | A default, with no cap on your exposure |
How Can You Limit What a Personal Guarantee Can Reach?
A signed guarantee cannot be undone at will, but how much it can touch is not fixed either. These steps make a practical difference:
- Keep business and personal finances separate. Use separate accounts and keep proper records. Mixing them gives a creditor an argument that you and the company are the same.
- Read what the guarantee covers. Some are limited to one advance or a dollar amount. Others follow every future agreement with the same MCA company.
- Check whether a spouse signed. If only one of you did, jointly held property may be treated differently than you expect.
- Know what is protected where you live. Retirement accounts and part of your home equity are often shielded from creditors.
- Act before a judgment. Your options are much wider before a court judgment exists.
What does not work is moving money or property once an MCA company is already coming after you. A court can reverse those transfers, and the attempt can hurt your position in any negotiation. Learn more about what happens if you default on a merchant cash advance.
How Tayne Law Group Protects You From Personal Liability
Tayne Law Group reviews MCA contracts and guarantees for terms that may be illegal or unenforceable. If we find problems in your contract or in the MCA company’s conduct, we can challenge the guarantee and the agreement itself.
Even when your liability cannot be limited, our MCA attorneys may be able to negotiate a settlement of your MCA debt, protect assets that state law shields, or defend you against MCA lawsuits.
Call 866-890-7337 or fill out our short contact form to schedule a free phone consultation. We never share or sell your information, and all conversations are confidential.
FAQs
What is a personal guarantee in a merchant cash advance?
A personal guarantee is a clause where you personally promise to back the business’s obligations under the MCA. If it is triggered, the MCA company can try to collect from your personal assets.
How can I tell if my MCA contract includes a personal guarantee?
Look for sections titled “personal guarantee,” “personal guaranty,” “guarantor,” or “individual liability.” Also check whether you signed twice, once for the business and once in your own name.
What happens to my personal assets if I default on an MCA with a personal guarantee?
The MCA company may sue you personally and, if it wins a judgment, try to freeze your bank accounts, garnish wages, or place liens on property. Assets protected by state law, such as most retirement accounts, are generally off limits.
Can I negotiate or limit a personal guarantee before signing?
You can ask for a cap on the guaranteed amount, a guarantee limited to performance rather than repayment, or a release after a set number of on-time payments. Have an attorney review the contract before you sign.
Does a performance guarantee mean I am not personally liable?
Not entirely. A performance guarantee usually applies when the business breaks specific promises, such as blocking withdrawals or stacking, rather than simply running out of money. If you break one of those promises, you can still be personally liable.
Can I protect my personal assets after I have already signed a guarantee?
Partly, and timing matters. Keep business and personal finances separate going forward, review what the guarantee covers, and address the debt before a judgment is entered. Moving assets once an MCA company is pursuing you can be reversed by a court.
