Personal Guarantee

[joey2509]

I am about to move my new business into a warehouse space, the landloard wants a personal guarantee for the 3 years of the lease, which mean is the biz folds in 6 months that I will owe him like 35,000. Is this standard? Any recourse?

 

[Rathi]

I'm not sure that's the standard, but I think if you plan for the biz to flop, do not do a 3 yr lease option.

Each contract is different, and depending on the experience of the leaser, there will be measures to ensure "something", that may have happened once, will not happen again.

I think it's normal to have a clause in the lease, stating the payment in full is expected, if certain circumstances are/are not met. This could be 2 payments behind, or general default on the payment schedule arranged at closing. ReaD what you sign, and remember, if in 3 yrs, you don't have 35k, or whatever the agreed payoff ammount will be, you (in some cases), start over. You would sign a new lease, for X yrs., and again, in X years, payoff is expected.

Some sellers will work with you, and upon renewal of contract in first 3 yrs., allow those payments made, to carry over.

 

[Michael Wechsler]

It does happen with non-creditworthy businesses or high risk but I'm not sure I'd be comfortable with that many years. This is purely a business decision whether to put yourself personally liable on the hook for your business. Part of the negotiation could be on how much money you put up front in the security deposit and what may need ot be current. Rathi has a few ideas as well.

Originally posted by joey2509
I am about to move my new business into a warehouse space, the landloard wants a personal guarantee for the 3 years of the lease, which mean is the biz folds in 6 months that I will owe him like 35,000. Is this standard? Any recourse?