Personal Guarantee and Loan agreement to Start Business

Personal Guarantee and Loan agreement to Start Business

  • Applicant: Krissy
  • Applying for: Personal Guarantee and Loan Agreement
  • Challenges:
    • Could not get funding to start her company, so she had to ask her parents for a loan
    • The parents wanted Krissy to get a formal loan agreement and a personal guarantee in case the company did not succeed
    • Krissy and her friend were not familiar with the legal process
    • The friend also had to agree with this arrangement.


Krissy and her best friend had always had big dreams of forming their own company together. There was just one problem: they had no money. To get their business off the ground, they calculated that they needed at least $100,000.

The first thing Krissy and her friend did, naturally, was to go to their local bank to get a loan. But because they were so young and had no credit or substantial business plan, the bank refused. This did not discourage Krissy however. Never known to give up a fight, she tenaciously called bank after bank, making her case with much enthusiasm to any loan officer that would listen, but no one was willing to invest in someone so inexperienced.

Finally, after months of rejection, Krissy turned to her parents for help. She had wanted so badly to do this on her own, without her parents’ money, but she was out of options. She sat her parents down in the living room one night and anxiously told them what she needed, barely managing to get the request out without stammering over her own words. With a stranger, she had no problem asking for money, but with her parents, it was a completely different story. She was so sure they would be ashamed of her for failing to get the money on her own. She only asked for $33,000. The rest of the money would be covered by her and her friend. Once she finished her speech, Krissy closed her eyes and braced herself for another rejection.

To her great surprise, her parents agreed to loan her the money. Krissy screamed for delight and hugged her parents tightly. There was just one condition, they said: they wanted to have both a formal loan agreement and a personal guarantee in case the company did not succeed so that Krissy would understand the value of what they were giving her. She agreed immediately and they reached out to Tsang & Associates.



The family had been long-term clients with Tsang & Associates, so they turned to us to assist them with drafting up a loan agreement and personal guarantee. They trusted us to handle the dealings in a way that would help their daughter realize the gravity of their investment and to educate her so she would understand the process of this type of agreement. We sat down with Krissy, her parents, and her friend in our office and went over all the details of the loan thoroughly and answered any questions they might have. We made sure to define all the legal terms and conditions between both of the parties, especially Krissy and her friend. Our next step was to make sure the agreement did not have any contradicting logic or ideas by going over the contract in detail and carefully multiple times. Once we explained the document in detail with both parties, the last step was to get a notary and sign the agreement. The only issue we would run into was if Krissy’ friend would not be satisfied with the document, for which we had a back-up plan.



In the end, everyone was satisfied, the loan agreement and personal guarantee were signed. Krissy and her friend finally had the funds to start their business and they could not be more grateful to Krissy’ parents and Tsang & Associates for making this happen. Krissy is one step closer to fulfilling her dreams.