A personal guarantee on a company commitment binds the owner's personal assets to the company's obligation. DRG Law names the exposure before the signature.
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Personal exposure
A personal guarantee on an Ontario commercial lease binds the owner's personal assets for the full lease term. If the company closes early, the landlord recovers against the owner's house, savings, and investments. The clause survives the company that signed it.
Owners often assume the corporation is the wall between business risk and personal life. The personal guarantee, on the lease, on the line of credit, on the supplier account, is the clause that knocks the wall down. DRG Law names the exposure before the signature and writes the structural options the owner has.
The decision
The four places below carry the personal exposure on most owner-operated businesses. Each one has structural options the owner can ask for before signing.
A full personal guarantee on a commercial lease binds the owner's personal assets for the full lease term. Structural options: time-limited guarantee (year one or year two only), capped guarantee (specific dollar limit), good-guy guarantee (covers landlord costs of finding a replacement tenant), or no guarantee with a larger deposit.
Banks ask for personal guarantees on small-business lines of credit. Structural options: guarantee the line only (not all bank facilities), cap the guarantee at a dollar limit, or negotiate a sunset (guarantee falls away after the company shows consistent revenue).
Suppliers and trade vendors put personal guarantees inside credit applications, sometimes in fine print. DRG Law reads supplier templates and asks for the company-only version where available.
Investor agreements often carry personal indemnities on the representations the founder made about the company. Structural options: cap the indemnity at the investment amount, time-limit it, or escrow part of the investment instead.
How DRG Law writes it
Every personal guarantee on a DRG Law file gets a short note before the signature. The note names what the guarantee covers, what it costs in the worst case, and the structural options to ask the other side for.
The worst-case dollar number, on paper, before the signature. Lease length times monthly rent for a lease guarantee. Total credit limit for a line guarantee. Investment amount for an investor indemnity.
Three options DRG Law asks for, in order of strength: full removal, capped guarantee, or time-limited guarantee. The owner picks the option to push for; DRG Law writes the redline.
When the other side will not move, DRG Law names the structural fallback, a larger deposit, a different counterparty, a shorter term, that reduces exposure without removing the guarantee.
Common questions
A personal guarantee binds the owner's personal assets to the full lease term. If the company closes early, the landlord recovers against the owner's house, savings, and investments. The clause survives the company that signed it. DRG Law names three structural options before the signing date.
Sometimes. Landlords in soft leasing markets accept time-limited guarantees, capped guarantees, or good-guy guarantees instead of a full personal one. In tight markets, the guarantee usually stays; the structural moves are around its size and length.
Yes, when the obligation is purely the corporation's. The corporation is the wall between business risk and personal life. The wall comes down clause by clause, every time a personal guarantee is signed on a company commitment.
A good-guy guarantee limits the owner's personal exposure to the landlord's costs of finding a replacement tenant if the company leaves early. It is a structural middle ground between a full personal guarantee and no guarantee. DRG Law asks for it where the landlord will entertain it.
Next step
Once the personal guarantee is signed, the structural options close. Send the lease, the credit application, or the investor document before the signature, and DRG Law names the exposure and the options.