A commitment by the business owner to be personally liable if the business does not meet its obligations.
Common in advances despite the transaction being framed as a purchase of receivables rather than a loan. A guarantee broad enough that the funder carries no genuine risk of the receivables failing is one of the features cited in recharacterisation arguments.
Recharacterisation
A court or regulator determining that a transaction structured as an advance was, in substance, a loan.
Default
A merchant’s failure to meet the terms of the advance agreement, most commonly repeated missed or returned remittances.
Collateral
Assets a secured party can claim if the obligation is not met.
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