Is it "market" to sign a Personal Guaranty on Seller Note

by a searcher from Southern Methodist University

Oct 24,2019

Currently negotiating an LOI, and we have shifted to Seller Note Terms.  Is it typical to sign a personal guaranty for the Seller Note portion?  I know it is typical for Seller to ask, but not sure if it is typical to negotiate that out of the terms.  Thanks in advance for the help!  

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searcher from Harvard University - Harvard Business School

I've never heard of a PG. The seller should be confident enough in the business's ability to pay him/her back. Plus, if you want to do SBA, they are going to make you put language in there that will conflict with a PG on the seller's note

03/15/2023 | like reply | 0 likes

searcher from Northwestern University - Kellogg School of Management

Don't personally guarantee a seller note. 1) it's not market. 2) it defeats the purpose of aligning incentives where the seller has a stake in the company's future success, 3) in many scenarios a bank loan would actually be less cash annually b/c the amort will be 10 years. seller note is usually shorter.

03/15/2023 | like reply | 0 likes

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