Personal Guaranty Carve-Out
A provision limiting what a personal guarantee actually covers, excluding certain circumstances or losses from the guarantor's personal liability.
Rather than making a guarantor liable for absolutely everything, a carve-out narrows the guaranty to specific triggering events, such as fraud or misrepresentation, while excluding liability for ordinary business underperformance.
Reviewing whether, and how, a personal guarantee includes carve-outs is an important part of understanding the real personal risk a business owner is taking on with a given loan.
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