The Personal Guarantee Trap: The Contract Clause That Can Follow a CPG Founder Home
Most CPG founders sign personal guarantees without understanding the risk. Jeff Church has skirted them for 40 years. Here's how he did it — and when you can't.
I was sitting across the table from a co-manufacturer a few years ago — this was early in one of my ventures, before Suja — going over a production agreement. Standard stuff. Minimum order quantities, pricing, payment terms. Then we got to page eleven, and there it was.
A personal guarantee clause.
The attorney across from me said it was "routine." The co-man said everyone signs it. My business partner at the time shrugged and reached for the pen.
I told them I needed twenty-four hours.
That single pause probably saved me a quarter million dollars.
I've been doing this for forty years. Eight companies. Forty-four fundraising rounds. Relationships with co-manufacturers, equipment vendors, commercial landlords, bank lenders, distributors, and retailers. And through all of it, I've kept my name off personal guarantees. Not always easily. Not without negotiation. But I've done it.
"I've skirted personal guarantees for forty years. Don't do it."
That's not just a line. That's a scar talking.
Most CPG founders don't understand what a personal guarantee actually means until they're on the wrong end of one. And by then, it's too late.
Here's what a personal guarantee actually is, in plain language: it's a clause that says if your company can't pay, you pay. Not your LLC. Not your C-corp. You, personally. Your savings account. Your home equity. Your retirement. The corporate veil that every founder believes protects them? A personal guarantee cuts right through it.
They show up everywhere in CPG:
Co-manufacturer agreements. Your co-man wants assurance that if you walk away from the relationship or don't hit your minimums, someone is on the hook. Guess who they want that to be.
Equipment leases. Early-stage brands often lease production equipment — fillers, labelers, HPP machines. The leasing company doesn't know you from Adam. They want a personal guarantee.
Commercial kitchen and warehouse leases. Landlords have seen too many startups. They'll ask for a personal guarantee on top of a security deposit, especially if your LLC is less than two years old.
Bank credit lines. Any small business line of credit from a traditional bank will come with a personal guarantee, almost without exception, until you have the revenue and credit history to negotiate differently.
Supplier agreements. Your packaging supplier. Your ingredient distributor. Long-term contracts with meaningful minimums often have some version of personal liability baked in.
The language varies. Sometimes it's explicit: "Founder hereby guarantees..." Sometimes it's buried in a cross-default clause or a termination provision that you'd miss if you weren't looking. Which is exactly why most founders miss it.
CPG is a "Penny Profit" business. The pennies matter. And a personal guarantee isn't a penny — it's a potential catastrophe.
Think about the Rule of Twos for a moment. Everything in this business takes twice as long and costs twice as much as you planned. That means your co-man relationship is going to hit friction. Your volumes are going to come in below forecast at some point. Your equipment lease payment is going to feel tight at the worst possible moment. The scenario that triggers your personal guarantee? It's not a black swan. It's a Tuesday.
So here's how you fight it.
First, negotiate a corporate guarantee instead. This means your company guarantees the obligation, not you personally. If your company defaults, the creditor can pursue company assets — but not your personal ones. A co-man or landlord may accept this, especially if your company has real assets and a track record. It's always worth asking.
Second, offer collateral. Sometimes what the other party really wants is security that they'll get paid. If you can pledge specific company assets as collateral — equipment, inventory, receivables — you may be able to satisfy that need without personal liability. The negotiation is: "I won't sign personally, but here's what you can put a lien on."
Third, negotiate a burn-down provision. This is a clause where the personal guarantee reduces over time as you demonstrate performance. Hit your minimums for twelve months? The guarantee drops from $500K to $250K. Hit them for twenty-four months? It goes away entirely. This shows good faith while limiting your long-term exposure.
Fourth, cap the amount. If you absolutely cannot avoid signing a personal guarantee, cap it. Never sign an unlimited personal guarantee. Negotiate a dollar ceiling — and make it realistic, not aspirational. A $50,000 cap on a $2 million co-man agreement is a very different conversation than an uncapped one.
Fifth, exclude specific assets. Your primary residence. Retirement accounts. Your spouse's assets if they're not a party to the business. A good attorney can help you carve these out explicitly from the guarantee.
The other party will push back. They'll say it's "standard." They'll say everyone signs it. They might even walk away from the conversation for a day or two to make you sweat.
Walk with them if you have to. Then come back with a counter.
In my experience, roughly half of personal guarantee demands are negotiating positions, not hard requirements. The other half are firm. The only way to know which is which is to push.
There are situations where you won't be able to avoid a personal guarantee. Early-stage, no track record, essential relationship, no leverage. I understand. If the only co-man in your city who can run your format requires a personal guarantee and you need to start producing, you may sign it. I get it.
But go in with eyes open. Know what you're signing. Know the triggers. Know the ceiling. Read every word.
And the moment you have enough history, enough revenue, enough credibility — renegotiate. Most agreements have points at which you can revisit terms. Use them.
Hope is not a strategy. Neither is "I'll figure it out if it goes wrong." You figure it out before you sign, when you still have negotiating room.
The most expensive education in CPG isn't the co-man that raises prices on you. It isn't the retailer that takes your slot and then delists you. It isn't even the fundraising round that falls apart at the finish line.
It's signing something you didn't fully understand. Because those kinds of mistakes don't just cost the company. They can follow you home.
Forty years. Keep your name off personal guarantees. And when you can't, make sure you know exactly what you agreed to.
If you're navigating the legal and financial complexity of scaling a CPG brand, the CPG Founders MBA is built to help you understand every lever in your business — not just the ones that show up on a pitch deck. And if you're in the thick of it right now, the 90-Day Breakthrough is where we work through it together.
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