Basically there were two officers with each 50% of shares of an incorporated company and the company could no longer operate due to cash flow. The company had a $7000 balance with a major financial institution as an overdraft protection amount that was granted a year ago. We signed documents, but I am unsure if this was personally guaranteed at the time. My partner is not agreeing to pay off his half of the balance so this amount was sent to a collection agency. The have listed my name and the Incorporated company and stated that "Your credit bureau is being negatively impacted by this non-payment but can still be repaired." I just got this letter today and wondering if anyone can give me some good advice on what I should do. If it is not personally guaranteed can this affect my personal credit history?
2007-11-20 17:54:04 · 3 answers · asked by John A. 2 in Business & Finance ➔ Credit
Thanks for the reply! In this case I remember my partner and I signed documents to grant the overdraft protection. Should I go to the branch and ask for a copy of this to see if it was a personal gurantee? We are both officers to the incorporation and 50% shareholders. They have not marked anything on my credit as of yet. I guess I answered my own question and should find out if I personally guaranteed this overdraft protection amount. What do you think?
2007-11-20 18:15:10 · update #1
Checked with my bank today and the line of credit is personally guaranteed with my name and my partners. The collection agency has give me until 11/26/2008. The problem now is that my partner cannot come up with his half by that date even with credit card advance or loan etc.... Any ideas since I have my half ready to pay?
2007-11-21 14:45:24 · update #2
Yes I think that will be one of my strategies where I have to draft a promissory note and find out when my partner can come up with his half. I am also looking into ways of extending the deadline before it affects my credit. This may require legal action and lawyer is looking into this tomorrow morning. The messed up part is that he has 2 condos (maybe cosigned) and all his money is tied in there while I have more liquidity. Thanks for all the ideas and keep them coming. Hopefully this is a lesson where everyone can learn from....Make an airtight agreement before going into business with partners!!!
2007-11-21 16:03:35 · update #3
Since there is a "personal endorsement" can you pay off the entire amount, and then have your business partner sign a "promissory note" payable to you?
2007-11-21 14:53:24 · answer #1 · answered by !!! 7 · 0⤊ 0⤋
Check you loan documents. Most banks require the owners of small business to personally guarantee the corporations loans, especially at start up. This is because the business may not have the financial history or track record to support the loan on its own. If you signed a guarantee, then you are on the hook, and most likely your partner. If you didn't sign a guarantee, then you should not be held liable.
2007-11-21 11:08:21 · answer #2 · answered by gaiusjulius 1 · 0⤊ 0⤋
The whole idea of a corporation is that it is a separate legal entity, so its credit/debt does not impact the investors/employees. I work at a startup and if we fold, the bank cannot come and take my house. In this case, one of you had personally guaranteed the loan (think of it as being a cosigner on a loan). If the company defaults, he does assume the liability for the outstanding debt. This is true ONLY for those who guaranteed the loan.
All that being said, get a copy of your credit report, and challenge any entry they made (if they made one) as erronious. Also call them and tell them that you are not a party to the loan and they have no legal standing to collect from you.
2007-11-21 02:02:43 · answer #3 · answered by jglick1999 4 · 0⤊ 0⤋