What to do about personal guarantees on credit applications

Thea Dudley

Dear Thea,

What can you do when a potential customer refuses to sign the personal guarantee on your credit application? My company requires it and I lose sales because it of it. I may as well quit since I am going to starve here.

Signed, Tapped Out in Texas

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Dear Tapped Out,

Ready to give up so soon? I thought Texas sales reps were tougher than that. You are, quite frankly, sounding like you are all hat and no cattle. You’re in sales for heaven’s sake! You guys are used to hearing no and coming back with a smile and a plan, and a smile and a plan, and so on until you crack that nut and get that sale. You are like the shampoo bottle directions but instead of “wash, rinse, repeat,” it’s, “smile, plan, repeat.” Remember that old toy, Weebles? The slogan was “Weebles wobble but they don’t fall down.” Sales reps are like that—you wobble, but you don’t fall. How many analogies do I have to use here before you get the picture?

I am assuming that since you are coming to me, your credit manager is not offering you any solutions. Or is it that you haven’t asked her for options? Either way, let’s give you some suggestions so that you can get back on that horse and see if you can rope you some sales.

Since you mentioned that your company requires a personal guarantee (PG), let’s keep this awkwardness going by asking if EVERY account that is opened at your company has a PG tied to it. It is extremely unusual, and not all that practical, to make it a “must have” for every account. So, I have to ask, is it just the accounts you are bringing to the table, or does each and every account that is opened, has been opened, or is going to be opened, have a PG?

If it is EVERY account, no exceptions, then by all means let me apologize for my aggressive mocking of your lack of tenacity and offer to edit your résumé and wish you well on your job search. You may indeed be correct and will starve. Although, there are many who are willing to sign a PG, there are just as many who are not.

If your company has made exceptions and has accounts that were opened with no PG attached to the scared event, then they’re saying there’s a chance. You have to start asking questions—in a non-accusatory kind of way. No one likes to feel attacked, so dial it back and pitch a few softball questions at your credit manager.

Find out what was unique about the accounts that were not required to have PGs. What type of accounts were they? A national account (big box type), FOB (friend of the boss), is the account grandfathered in? What are the circumstances around the free pass?

Once you know what the background is you have an opening to move your requests forward. Sit down with your credit manager and go over the opportunity. If she is immovable and you feel strongly, tell her you respect her opinion but you are taking it up the food chain. Invite her to go with you, make a field trip out of it.

After taking your walk on the wild side and presenting your case, you are going to be able to take the temperature of the situation and find out exactly where this (possibly) hard and fast rule is coming from.

The flip side that I eluded to might be you. Do you bring nothing but questionable characters to the table? Are you shopping for your customers in the parking lot of your local big box store? Are you working hard to find every potential next bad debt write-off out there? What is your reputation with the credit department? If you brought me nothing but crap-on-a-cracker accounts, I would make you get PG’s too. Just sayin’.

I have given you a gift horse my friend; stop looking it in the mouth. Throw a saddle on it, ride on up and get your answers.

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