You signed a personal guarantee on your merchant cash advance. At the time, it probably felt like a formality. A box to check. Something your broker told you "everyone signs." And now you're behind on payments, or you're about to be, and you're wondering what that signature actually means.

What a personal guarantee actually does

Most business owners think an MCA is tied to the business. It's not. Or more accurately, it's not only tied to the business. When you signed that personal guarantee (and virtually every MCA agreement has one), you told the funder that if the business can't pay, you personally will.

That's not a metaphor. That's a legal obligation.

The personal guarantee converts what would be a business debt into a personal liability. The funder doesn't have to exhaust business remedies first. They don't have to try collecting from the business, fail, and then come to you. They can come to you immediately. And in most MCA agreements, they will.

The timeline after default — it's faster than you think

Here's what most business owners don't realize: there is no grace period. None. MCA agreements are commercial contracts, not consumer loans. You don't get 30 days. You don't get a courtesy call before the hammer drops. The moment you're in default, the clock starts — and it moves in hours, not weeks.

Days 1–3: The ACH retries and the fees stack. The funder will retry the daily debit. Then retry it again. Each failed attempt triggers an NSF fee from your bank (typically $25–$35 per attempt) and a returned payment fee from the funder. In a single week of missed payments, you can rack up $500+ in fees alone — and that's before anyone picks up a phone.

Days 3–7: The calls start. They don't stop. The funder's collections team will call your business line, your cell, and the personal guarantor's phone. These aren't polite reminders. They are aggressive by design. Some funders will start calling your customers and vendors (yes, the ones listed on your bank statements). They have every right to do that under the agreement you signed.

Days 7–14: The balance accelerates. The remaining balance — the full purchased amount, not just the daily payment — becomes due immediately. Default fees get added. Attorney fees get added. That $80,000 MCA you took? It's now a $110,000 judgment target. And it's all personally guaranteed.

Days 14–30: The lawsuits and the freezes. This is where the personal guarantee becomes a nightmare. The funder's attorneys file suit — against the business and against you personally. In many cases, they'll obtain a temporary restraining order (TRO) that freezes your bank accounts. Not just your business accounts. Your personal checking, your savings, your joint accounts. This can happen within 24 hours of filing, and in some jurisdictions, they don't even have to notify you first.

The confession of judgment problem

Here's something most business owners don't know until it's too late. Many MCA agreements contain a confession of judgment (COJ). This is a clause you signed that essentially says: "If I default, the funder can obtain a judgment against me without a trial."

Read that again. Without a trial.

No hearing. No chance to argue your side. No judge weighing the facts. The funder's attorney walks into court, presents the signed confession, and walks out with a judgment. Against you. Personally. Some states have banned or restricted COJs (New York limited them in 2019), but many MCA agreements are structured to be governed by states where they're still enforceable. You may have signed a confession of judgment governed by Virginia law while sitting in your office in Texas. And it's completely legal.

What the personal guarantee actually exposes

People think "personal guarantee" means they might have to pay out of pocket. That's an understatement. Here's what's actually at risk:

  • Your personal bank accounts — subject to freeze and levy once they get a judgment
  • Your home equity — depending on your state's homestead exemption, a judgment lien can attach to your property
  • Your car and personal assets — anything that isn't specifically exempted under state law
  • Your spouse's joint accounts — if you have joint bank accounts, those get frozen too. Your spouse didn't sign the MCA. Doesn't matter. The account is joint.
  • Your credit — a judgment appears on your record and stays there. Future financing, mortgages, car loans — all impacted
  • Your other businesses — if you own multiple entities and personally guaranteed the MCA, the funder can pursue assets across entities

And here's the part that really stings: the personal guarantee survives the business. If you close the business, dissolve the LLC, walk away entirely — the personal guarantee is still enforceable. You still owe the money. The business dying doesn't kill the debt.

What you should NOT do

This is where business owners make it worse. Every time.

Don't ignore it. The MCA funder is not going to forget. They're not going to write it off. The longer you wait, the more fees accrue, and the fewer options you have.

Don't close your bank account and open a new one. This is the first thing people try and the worst thing you can do. It's an explicit default trigger in virtually every MCA agreement, and funders know to look for it. You'll accelerate the timeline and give them additional grounds for legal action.

Don't take on another MCA to cover the first one. Stacking is a default event under most agreements. You're not solving the problem. You're doubling it — and now you have two funders with personal guarantees coming after you.

Don't file for bankruptcy without talking to an attorney first. Bankruptcy might be the right move, but the timing and type matter enormously. Chapter 7, Chapter 11, and Chapter 13 all treat MCA debt differently. And some MCA agreements have clauses that make bankruptcy filings an additional default trigger that accelerates other obligations.

What you should do

Talk to someone who actually handles MCA debt. Not your CPA (they'll tell you to "work it out with the lender"). Not your brother-in-law who's an attorney (unless he specifically handles MCA defense). And definitely not the broker who got you into this — they're not on your side anymore.

You need someone who understands UCC liens, confessions of judgment, ACH dispute mechanics, and how to negotiate with MCA funders from a position that isn't complete surrender. Because right now, the funder holds every card. But that changes the moment you have representation that knows this space.

At Delancey Street, this is what we do. We're attorney-owned, we handle MCA debt settlement and defense, and we've seen every version of this story. If you're behind on payments, staring at a personal guarantee, and wondering how bad this is about to get — call us before the funder's attorney calls you.