Personal Guarantees in Business Funding & MCAs
A personal guaranty is how business funding reaches past the company and into your personal assets — especially when paired with a confession of judgment.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
Most business funding requires an owner to personally guarantee the obligation. In an MCA, the guaranty is often framed as covering the funder’s losses if the merchant breaches — but broad drafting can make it a full personal guaranty of the entire balance.
Understanding when and how far the guaranty reaches is essential before you sign.
Topics to check
A narrow MCA guaranty covers only the merchant’s breach of specific promises (for example, diverting receivables or shutting down the business), not the ordinary risk that sales simply fell. A broad guaranty makes you personally liable for the entire uncollected balance, fees, and attorneys’ fees on any default — converting a non-recourse-sounding "purchase" into full personal recourse.
Read exactly what triggers the guaranty and what it covers.
When a personal guaranty is combined with a confession of judgment, the funder can obtain a judgment against you personally — without a hearing — and move immediately against your personal bank accounts and assets. The two clauses together are far more dangerous than either alone.
Check whether the confession of judgment names you (the guarantor) personally, not just the business.
Confession of judgment (Cornell LII Wex)Watch for guaranties that pull in a spouse or that purport to make you liable as a "validity" guarantor for the truth of the merchant’s representations. Scope, joint-and-several liability, and any waiver of defenses all expand personal exposure.
Negotiate the guaranty down to genuine misconduct, and confirm who is being asked to sign.
Key takeaways
- Most business funding requires a personal guaranty from an owner.
- A narrow guaranty covers misconduct; a broad one covers the whole balance.
- A guaranty plus a confession of judgment reaches personal assets without a hearing.
- Watch for spousal guaranties and "validity guarantor" language.
- Negotiate the guaranty down to genuine breach, and confirm who must sign.
Official resources
Legal-review notes
Guide confidence marker: Medium confidence.
- Guaranty scope, spousal-signature, and waiver enforceability vary by state and document.
- Have counsel review the guaranty and any confession of judgment naming the guarantor.
Frequently asked questions
Do I have to personally guarantee an MCA?
Most funders require it. The key is scope: a narrow guaranty covers only specific misconduct (like diverting receivables or closing the business), while a broad one makes you personally liable for the entire balance and fees on any default.
What makes a personal guaranty especially dangerous?
Pairing it with a confession of judgment, which lets the funder get a judgment against you personally without a hearing and immediately pursue your personal accounts and assets. Check whether the confession of judgment names you individually.
Can a personal guaranty reach my spouse?
Some are drafted to require a spouse’s signature or to reach jointly held assets. Review who is being asked to sign and the scope of liability, and negotiate the guaranty to cover only genuine misconduct.