Small Business Owners Feel the Weight of Personal Debt Guarantees

The pressure is tightening for American restaurant, gym and other small business owners trying to hold out until the economy fully reopens. And unlike most large companies, the burden is often deeply personal.

Townsend Wentz borrowed from his family to open his first fine dining restaurant in Philadelphia in 2014. The chef tapped into the equity in his home, erased any semblance of a retirement account, and diverted college funds for his daughter into his business. Approximately $ 1.5 million in personal investment is now in the balance. The pandemic repeatedly closed its five locations for parts of the year.

On top of that, Mr. Wentz, 53, has a personal warranty in place that makes him liable for about $ 540,000 in rent payments over five years and an additional $ 175,000 for a liquor license. The collateral weighs on Mr. Wentz as he juggles phone bills, tax obligations, rent payments, and other expenses.

“It’s like trying to stand on quicksand,” he said. He expects all of his restaurants to reopen this month.

Small business owners who go into debt or sign a lease often end up providing a personal guarantee, in which they promise to be responsible for payments if the business is unable to pay.


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