A merchant cash advance funder can reach an owner's personal assets, and the instrument that lets it is the personal guarantee buried in the agreement. The guarantee makes the owner answerable for the balance in his individual capacity. The corporate form, the LLC the owner formed precisely to keep business risk on one side of a line, does not hold when the owner has signed his own name to the debt on the other side.
The mechanics are plain once the guarantee is in hand. The funder obtains a judgment against the owner personally, and that judgment can be enforced against the property a judgment ordinarily reaches: bank accounts in the owner's name, non-exempt personal property, and in some states a lien recorded against real estate he owns. I have written before about owners who believed the company was a sealed compartment and discovered, late, that they had personally guaranteed the very advance that sank it. The compartment was never sealed. They had signed the seam open.
What Is Reachable And What Is Not Depends On Where You Stand
State exemption law draws the boundary, and the boundary moves across state lines. A homestead exemption protects some portion of equity in a primary residence, and the protected amount ranges from nominal in some states to nearly unlimited in others. Retirement accounts often sit beyond reach. Tools of a trade, a vehicle up to a stated value, certain household goods: each carries an exemption that varies by jurisdiction. The owner who assumes everything is exposed is as wrong as the owner who assumes nothing is. Both will be surprised, and the surprise tends to arrive on an ordinary weekday afternoon, when the mail brings an information subpoena demanding a full accounting of personal property.
A personal guarantee is a second signature that quietly outlives the first. The company can fail, dissolve, vanish from the Secretary of State's records, and the guarantee keeps standing in the rubble, pointing at the one person who promised to pay if no one else did.
The Guarantee Is Also Where The Negotiation Lives
The same instrument that creates the exposure creates the conversation. A funder holding a personal guarantee against an owner whose reachable assets are modest, after exemptions, holds a claim worth far less than its face. That gap is the room a settlement occupies. And the funder's position has a flaw the owner can press: the recharacterization argument, that the advance was never the purchase of receivables it claimed to be but a loan, and a usurious one, which would put the entire instrument, guarantee included, in question. The Federal Trade Commission has already banned merchant cash advance operators from the industry for the conduct that surrounds these guarantees, RCG Advances and RAM Capital among them. A guarantee is enforceable. It is not invulnerable. The two facts coexist, and the distance between them is where the work gets done.
Most owners call when the demand turns personal. The first conversation is a diagnosis of what the guarantee actually reaches, not a commitment, and it costs nothing.