In this video, you get answers to these questions:

  • If your business fails and you file bankruptcy, how does this affect your credit?
  • What happens if your business fails?
  • What if the business files for bankruptcy?
  • What is a personal guarantee?

Video Transcript

If my business fails and I file bankruptcy, how will that affect my credit? I’m Aaron Hall. You can learn more about me at Please see the disclaimer below this video. You’re a business owner, and you are interested in growing a business, but you understand there’s some risk involved, and you’re wondering what happens if the business fails? How could that affect my credit? What if I have to file for bankruptcy? What if the business files for bankruptcy? How does all that work? That’s what we’re going to cover today.

Typically, when you are a business owner, if you are incurring debt, so in other words, you’ve got a credit card, you’ve got an SBA loan, which is a loan from the Small Business Administration, which is part of the United States Federal Government, or you get a bank loan of some other sort, or maybe you rent some property, some office space with a lease, for all of those scenarios you are usually required by the lender or the landlord to sign a personal guarantee. That, quite simply, says, “Look. I get that you have limited liability, because you have an LLC or a corporation, but I don’t want to be stuck going after a business entity that has no assets.” So, the lender says, “I want you to sign a personal guarantee.” That simply means you will personally guarantee payment if the business doesn’t come through. So, that is usually the case for a small business. You will have to personally back that, which means if your business fails and can’t make payments to a lender, the lender can go after you.

Now, can you file for bankruptcy? Usually you can. There are some rare exceptions, in the cases of fraud or other problems, but general idea is that you can. That will affect your credit. Your credit score with the credit bureaus will be affected by that going on your record. If you have questions about a business and bankruptcy issues or trying to turn around a business that is hemorrhaging money, or if you are exploring ways to limit some of your risk as you move forward in growing your business, feel free to check out the other videos here or visit

Next Steps

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