{{first_name}} This week, I am going to talk about a question I always ask business owners that almost nobody can answer correctly.
It’s not "what's your margin." or "what's your backlog."
Question is: Can you list every personal guarantee you've signed for your business and what each one actually puts at risk?
Over last 20 plus years, I've reviewed the paperwork behind hundreds of construction and trade businesses, and I can count on one hand the owners who could answer that question correctly. After my discussions, most owners discover guarantees they forgot they ever signed. A few discover guarantees they never realized their spouse co-signed.
Here's the uncomfortable truth about our industry. You may own a corporation, but in most cases the corporation doesn't carry the risk. It’s you, who does, personally. Your house, your savings, your family's balance sheet; pledged, quietly, across a stack of documents signed over many years, usually in a hurry, usually somewhere between the coffee and the handshake.
Let me show you where they hide. I call this the Guarantee Map, and there are six places to look:
1. The bank operating line. The obvious one. Almost every credit line under $5M in Canada, carries a full personal guarantee. Many are also co-signed by owner’s spouses’. Check whose names are actually on it.
2. The bonding facility. This is the one many owners understand least. When you signed your surety's indemnity agreement, you almost certainly signed a personal indemnity. You and often your spouse agreed to personally repay the bonding company for any claim, on any bonded job, ever. That agreement usually survives until the surety formally releases you. It doesn't expire on its own.
3. Equipment loans and leases. Each truck, each excavator, each piece of financed equipment often carries its own guarantee. Ten pieces of equipment can mean ten separate signatures.
4. The shop or yard lease. Landlords routinely require personal covenants from business owners. Sometimes for the full term of the lease.
5. Supplier credit applications. The sneakiest one. That one-page credit application you filled out fifteen years ago to open an account at the supply house? Read the fine print at the bottom. There's very often a personal guarantee buried in it. It didn't expire when your business got bigger.
6. Credit cards and fuel cards. Small individually. Never small in a crisis, because they're the fastest to be enforced.
Now the part that matters: what to do about it. Three moves, I suggest in the following order.
First, build your Guarantee Map. One page. Every guarantee, who signed it, what it covers, what triggers it. Most owners have never seen their full exposure in one place. It takes an afternoon and it changes how you sleep.
Second, understand that guarantees are negotiable, but only if you ask. Banks and sureties almost never volunteer a release. But a business that has strengthened its balance sheet over five or ten years has earned the right to ask for caps, for limits, for a spouse's release, or for a "burn-off". A guarantee that shrinks as the business proves itself. The paperwork you signed at $2M in revenue was priced for a $2M company. If you're at $8M now, you're overpaying in risk.
Third, stop adding new ones on autopilot. Every new lease, loan, and credit application is a negotiation moment. Sometimes the answer is no guarantee. Sometimes it's a capped one. You only get that answer if you treat the signature as a decision instead of a formality.
What happens to these guarantees when you sell the business?
The short answer, they don't transfer. Not automatically. A buyer buys your company; they don't inherit your signatures. Your bank line typically gets paid out at closing, so that one dies naturally. But the others live on until someone formally releases you. The surety indemnity is the classic trap: even after you've sold, you can remain personally on the hook for bonded jobs completed before closing until the bonding company issues a written release. The shop lease guarantee often runs to the end of the lease term unless the landlord agrees to substitute the buyer. And that supplier credit application from fifteen years ago? It doesn't know the business changed hands.
This is why guarantee releases are a negotiated item in every well-run business sale. They need to be listed, chased, and signed off one by one before the deal closes. Sellers who never mapped their guarantees discover them in the middle of a transaction, at the worst possible moment, when a missing release can delay closing by weeks. And here's the quiet benefit nobody mentions: a clean, documented guarantee map signals to any sophisticated buyer that this owner runs a tight ship. The map you build this month isn't just for sleeping better. It's an asset you'll cash in years from now; whether you sell, refinance, or simply renegotiate from strength.
The Number This Week:
The number this week isn't from a study. It's yours: the count of active personal guarantees attached to your name right now.
Most owners guess two or three. When they actually build the map, the real number is frequently somewhere between six and a dozen and I've seen higher. (That range is directional, from what I see across businesses. Nobody tracks this number, including the people whose houses depend on it.)
One question for you this week: If something went badly wrong on a job next month, do you know today, specifically, what you and your family have personally guaranteed?
Why am I writing this? I've spent over 20 years working alongside construction and trade business owners across Canada. My firm, N3 Business Advisors Inc., has helped hundreds of contractors buy, grow, value, and sell their businesses. I started my career as a teacher, and that part of me never left. So once a week, I put one lesson in your inbox, for free, to help you build a business that buyers line up for. If this was useful, pass it to one owner who needs it. If it wasn't, reply and tell me what you'd rather read about.
Nitin Khanna, CFA · Founder, N3 Business Advisors · Mastering the Business of Construction