As the founder, I have signed personal guarantees on our commercial leases, equipment loans, and credit lines. How do we systematically clean up and untangle these personal liabilities during our exit runway so they do not hold up the sale or leave me exposed post-transaction?

Question

Tyler Smith · Accepted Answer

Personal guarantees are a ticking financial liability that many founders overlook until they are sitting at the closing table. If you have personally guaranteed your commercial building lease, bank lines of credit, or key equipment loans, you remain financially exposed long after you sell the business if the buyer defaults. To protect yourself, you must systematically address these guarantees during your exit runway. Begin by auditing every single contract, lease, and loan agreement to compile a complete list of your personal guarantees. As you negotiate renewals or new agreements on your runway, actively work to remove these guarantees or insert automatic release clauses upon a change of control. If a lender or landlord refuses, make the removal of all personal guarantees a non-negotiable condition of the final purchase agreement. The buyer must agree to refinance the debt or replace your personal guarantee with a corporate guarantee at closing. By cleaning up these liabilities systematically before you go to market, you ensure a clean break from the business and protect your personal wealth after the transaction is finalized.