The Worst Case: How do personal guarantees work?

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What is a Personal Guarantee?

If you choose to finance the purchase of FedEx routes, your lending institution may ask you to sign a personal guarantee. A personal guarantee is a set of assets you are promising to surrender or liquidate to the bank if you are unable to make loan payments and you default.

Personal guarantees help banks recover their money in the event that your loan goes into default.

Both conventional financing institutions and the SBA use personal guarantees at times in their loan process.

The SBA is extremely rigorous about seizing or liquidating your assets when you default on a loan.

Personal guarantees with conventional banks or credit unions may also be strictly enforced. However, conventional financing institutions may be more lenient at times if they believe pushing hard on the personal guarantee will paint them in a poor light within their community.

The bottom line is this: lending institutions are incredibly serious about your personal guarantees and you need to think carefully about them before proceeding.

Missing Payments

If you believe you are going to miss payments on your loan you should reach out to your lender in advance. Ask your lender to help you restructure your monthly payments so that you are in a place where making the payments is feasible.

You have far more bargaining power in a restructuring conversation if you begin the conversation before default proceedings begin.

Learn More

Get more details about using financing for FedEx Routes for Sale: