Getting Personal

Question: Every bank I talk to about a credit line wants me to personally sign the loan. Can I get a loan that won't hold me personally liable for what happens to my company?

Answer: Entrepreneurs often have a tough time getting business loans without making personal guarantees--and for good reason. About half of all small businesses shut their doors within five years of launching, and banks don't want to be left out to dry. But there are creative ways to obtain unsecured loans and credit lines. One option is to deal with non-bank lenders such as factors--financing companies that provide asset-backed credit lines secured by a company's receivables. Factors don't charge interest; instead, they buy your receivables at a small discount, but you may end up paying more than you would if you got a credit line from a bank, says Vasant Nanavati, CFO of marketing firm Active Response Group. For businesses with $10 million or more in annual revenue, solid growth and healthy cash flow, working with a mezzanine lender may be another option. "It's a tough task to get a loan without a personal guarantee," says Nanavati. "But there are possibilities out there for those companies willing to put in the effort and pay the price."

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Rosalind Resnick is the founder and CEO of Axxess Business Consulting, a New York City consulting firm that advises startups and small businesses. She can be reached by e-mail or through her website.