One topic I have seen as of late is searchers who don’t want to provide a personal guarantee against the debt they assume. Is it possible to get an investor who only backstops the personal guarantee? In that case, what are the typical terms for the investor? Interested to hear advice from those who have experience with this.
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As you can imagine it’s pretty difficult to price how many personal guarantees would pay out. Not to mention if you had PG insurance you would be more likely to pursue riskier deals as your downside is capped, but upside is not. Bit of an adverse selection problem.
As hard as a PG is to stomach for searchers I think there’s a lot of good reason they exist (from a lender perspective). It keeps the searcher from pursuing highly risky and speculative ventures. It also keeps a searcher bought in on a deal even if things go sideways. A searcher can’t just walk away from a company upon which they have a PG. I hate the thought of a PG as much as the next searcher, but if I’m not willing to stand behind a deal
why should a bank or any other investor?