Take the poll — How often have you had to pursue a personal guarantee to pay an outstanding commercial A/R? 

Personal guarantees will often make the difference in collecting a past due account compared to simply obtaining a judgment. Obtaining a personal guarantee should coincide with your credit policy and like every contractual document that you draw up, should be reviewed by your corporate counsel. 

Over the decades, we have seen many variations on a personal guarantee. Some have been as short as a paragraph that have probably omitted several crucial details, while others attempted to preempt every kind of challenge and loophole imaginable. 

What is important however is that the personal guarantee be sufficient to identify the guarantor as the legal representative of the company and clearly bind the guarantor to any unpaid A/R balance due to your company. It’s also imperative to regularly (at least annually) confirm that the guarantor is still with the company and that their status has not changed. 

Nancy Seiverd, President, CMI Credit Mediators, Inc.

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