Personal guarantee

A promise by an individual owner to cover business obligations personally if the business cannot.

Why it matters

A personal guarantee extends factoring risk to the individual, not just the business. Attorney-fee provisions and scope language determine how far the exposure reaches.

How it appears in contracts

The personal guarantee is a separate exhibit or section at the end of the factoring agreement, signed individually by each covered owner. Key provisions to review: (1) the scope—whether the guarantee covers all obligations under the agreement or only specific categories such as chargeback repurchase obligations; (2) whether it is a continuing guarantee that automatically covers future advances or is limited to the amounts outstanding at signing; (3) whether the guarantee includes an attorney-fee clause—a guarantor who loses a collection action may owe the factor's legal fees in addition to the principal; and (4) whether there is a cap on the guarantor's exposure. An unlimited, continuing, attorney-fee guarantee is significantly broader than a capped guarantee limited to outstanding advances.

Related terms

Related article: What is invoice factoring?

Related reading

Sources

  • International Factoring Association - International Factoring Association. Accessed 2026-05-19. Industry association source for factoring terminology and industry context.
  • Secured Finance Network - Secured Finance Network. Accessed 2026-05-19. Industry education source for secured finance and asset-based lending context.
Financial disclaimer. This page is educational only and is not financial, legal, tax, accounting, or credit advice. Factoring terms vary by provider and contract. Read the full disclaimer.