I take a personal guarantee from the controlling shareholder/manager of any borrower.
A personal guarantee has two functions.
First, a personal guarantee tells a lender that you are so confident in your business’s prospects that you will be personally liable for the business loan if there are difficulties and there is a collateral shortfall. If a personal guarantee keeps you awake at night don’t borrow the money. I don’t have much sympathy with people who won’t guarantee a billboard loan because I have to guarantee every bank loan which I use to help finance my lending businesses.
Second, a personal guarantee means that you will be working on behalf of the lender to maximize loan recovery if there are problems. In the rare cases where I’ve made business loans without a guarantee and the loan goes bad, the business owner is my adversary and is fighting me at every turn. If someone has a personal guarantee they are willing to cooperate with me in maximizing my loan recovery in hopes that I will let them off their personal guarantee.
The exception to the personal guarantee requirement occurs when there is a widely disbursed shareholder group in which no sign shareholder is controlling and no single manager is in charge or when the controlling shareholder is a professional equity fund. This is rarely the case with small billboard loans.
