When you start a business or grow your company, you may need to borrow funds. When your venture is a brand new one, the business probably does not have credit or collateral. This means that there are going to be very few financial institutions, if any, that will provide a loan to the business alone. You will need to take on the loan personally or co-sign for the loan in order to get the funds you need.
When you borrow money in your name for your company or when you sign a personal guarantee and promise to be responsible for the business debt, the lending institution should approve you as long as you are credit-worthy. Whether or not your spouse will need to sign loan documents for a business loan or personal guarantee is going to depend upon the type of loan you take on, the collateral you use, and your credit score.
When Does Your Spouse Have to Sign Loan Documents for a Business Loan or Personal Guarantee?
If you take out a business loan or personally guarantee a loan your company has taken out, your spouse is not necessarily going to need to sign anything. You can apply for the loan in your own name, using your own credit score. The bank should consider your income and your credit history to decide whether to lend you the money or to determine whether or not you can personally guarantee the company’s loan. Your spouse will not necessarily need to be a debtor on the loan, and thus should not necessarily need to sign any paperwork.
However, there are some exceptions to this rule. The most notable exception is when you put up collateral that belongs to both you and your spouse. If you and your husband or wife co-own any personal property (like a car or a house), it belongs to both of you and you both have a legal interest in it. You cannot use co-owned marital property as collateral for a business loan without your spouse also signing the loan form.
Your spouse will also need to sign loan documents for a business loan or personal guarantee if you are relying on your spouse’s credit score to qualify for the loan or if you have listed your combined household income on loan forms. In these situations, the bank needs to ensure that your spouse is agreeing to also repay the debt if you do not come up with the money on your own.
Because Nevada is a community property state, lending institutions may also ask for your spouse’s signature in other situations to confirm that your spouse is aware the debt is being taken out to support the business. This can vary on a case-by-case basis.
A business law attorney can provide you with information on when your spouse needs to sign loan documents and can help you to explore methods of financing your company while still protecting your personal assets. Call Pintar Albiston, LLP today to schedule a consultation and learn more about how we can assist start-ups and growing companies with all of their business needs.
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