MCA Personal Guarantee: What You're Signing
The personal guarantee in an MCA: what you're really signing.
Most merchant cash advances come with a personal guarantee from the owner. On many advances, it doesn't promise that you'll pay if sales fall. It promises that the business will keep the contract's rules: no hidden accounts, no blocked debits, no false statements. Break one of those and the funder can come after you personally. Read the guarantee's exact words, because they vary.
How is a performance guarantee different from a payment guarantee?
| Performance guarantee | Payment guarantee | |
|---|---|---|
| What you promise | The business follows the contract's covenants | The balance gets paid, no matter why |
| If sales drop and you reconcile | Usually not triggered | Can be triggered |
| If you block the debit or move deposits | Triggered | Triggered |
| Common on | Merchant cash advances | Loans and lines of credit |
The difference matters in court. A guarantee that makes you pay no matter what can make an advance look like a loan. Is an MCA a loan? covers what courts look at.
What does the guarantee usually cover?
- Keeping sales flowing into the account the funder debits.
- Telling the funder before you change banks, sell the business or close it.
- Not taking another advance if there's an anti-stacking clause.
- The truth of what you told the funder.
- Sometimes, the funder's legal costs if it has to enforce the contract.
Does the guarantee cover a slow month?
A performance guarantee doesn't. It covers the owner's promises, like keeping sales in the account and not switching banks without notice, and an honestly reported slowdown breaks none of them. A payment guarantee is broader, so read which one you're signing.
What does this look like with real numbers?
Say the business has $30,000 left on an advance. Sales fall by half. You send a reconciliation request with statements, and the payment adjusts. Under a performance guarantee, nothing happens to you personally. Now change one fact: instead of asking, you open a new account and send your card deposits there. That breaks a covenant. The default clause can make the $30,000 due at once, plus fees, and the guarantee lets the funder collect it from you.
What should you ask before you sign?
- Is this a guarantee of performance or of payment? Show me the sentence.
- Does it cover my spouse or anyone else who signs?
- Is there a confession of judgment tied to it?
- Does it end when the balance is paid, and will you confirm that in writing?
- Which state's law governs it?
This is general information, not legal advice. For your contract and your state, talk to a business lawyer.
Where does Afterfirst fit?
We can't change a funder's guarantee, but we'll tell you when one offer's guarantee reads broader than another's. Applying is free, and you never pay Afterfirst a fee. The funder pays our commission only if a deal funds, and the amount is in the offer paperwork before you sign.
Questions about your file?
Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.