Personal Guarantee

Personal guarantees are used in credit deals to secure funding for businesses. They are used by new and small businesses - generally, for companies that may not be established or for those with inadequate history to qualify for loans and other credit on their own. When a personal guarantee is given, the principals of the company pledge their own assets and agree to repay a debt from personal capital in case the company defaults. To summarize, the business owner or principal becomes a cosigner on the credit application.

The law in Alberta requires a lawyer if you are personally guaranteeing something. Alberta's Guarantees Acknowledgement Act has made it mandatory for a lawyer to sign the personal guarantee acknowledgement certificate with the person giving the personal guarantee. By signing the guarantee, the guarantor is losing the protection which creates a legal obligation that can have personal consequences. Guarantees Acknowledgement Certificate is a legal form signed by a lawyer confirming that they have examined a person providing a guarantee personally. The Certificate states that the lawyer is satisfied that the person understands the contents of the legal document that they are signing. By agreeing to a personal guarantee, the guarantor is agreeing to be 100 percent personally responsible for the repayment of the entire loan amount, in addition to any collection, legal, or other costs related to the loan.