Before Signing a Personal Guarantee, Price the Downside
Two partners lease a second service bay and finance equipment. The agreement makes the company the borrower but asks both people to guarantee payment. One partner will run the bay; the other supplies capital and is rarely on site. Their potential losses are not explained by their job titles.
The second bay can be empty while rent continues
Budget the lift, tools, installation, rent, insurance, technician wages, and ordinary supplies. Then forecast booked jobs after parts and labor. Suppose the new technician leaves after six weeks. The bay may have little revenue for two months while rent and debt still fall due. Draw that shortage from the company reserve and identify how far it can go before either partner would have to contribute personal cash.
If the plan pays only with a full appointment book on opening day, reduce equipment spending or wait for a technician and customer backlog. A guarantee does not create profit; it shifts the loss beyond the company if the company cannot pay.
Understand the promise before either partner signs
Read the actual obligation covered, whether either person can be pursued for all of it, what events trigger collection, and how release would work after an ownership change. A guarantee is distinct from collateral pledged in a specific asset. Qualified counsel can explain the legal effect and reconcile it with the partners' ownership documents. Providers decide what guarantees are required.
Agree internally who can draw funds, approve further borrowing, or sign a new lease. The quieter partner may carry exposure without operating control. If one later sells their stake, they should not assume the lender releases the guarantee automatically. Credit partner funding addresses a separate partnership structure; this page is about the guarantee each existing owner is asked to give.
Find the size that both can live with
Test the bay with fewer appointments and an early equipment repair. Decide whether the company can still meet payroll and rent and whether either household could absorb the remaining obligation if it cannot. If not, stage purchases or choose a smaller opening. Business payment capacity provides the operating cash test, while counsel handles the legal undertaking.
Make the downside a joint decision.
Bring the bay budget and actual guarantee language into the Funding Quiz. Both partners should understand the debt, control over spending, and exposure before opening the second bay.