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Sweet Promises

When do you have to personally guarantee a loan?

By George M. Dawson •

Opinions expressed by Entrepreneur contributors are their own.

Q: Iwant to borrow for equipment and improvements to my gourmetchocolate shop. The business is incorporated, and I own half. MustI personally guarantee the loan?

A:Like calories, guarantees are hard to avoid. Lenders wantguarantees for collateral and for psychological reasons. With apersonal guarantee, the lender can go after your personal andbusiness assets if the loan sours. A personal guarantee keeps theborrower focused on the business, making him less likely to quitand more cooperative with the lender.

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