# Deficiency

What is still owed after the collateral is sold and the proceeds applied.

This is where the [personal guarantee](https://searchspheresource.com/glossary/personal-guarantee) stops being an abstraction. Business assets rarely fetch their book value in a forced sale, so the gap between what the loan owes and what the sale raises is a personal debt, pursued from the guarantor, not the company. It is the number that makes collateral coverage worth checking before closing, and the reason a deal financed almost entirely against [goodwill](https://searchspheresource.com/glossary/goodwill) carries a different personal risk from one secured by equipment.

In numbers: A $900,000 balance against equipment and inventory that raise $350,000 at auction leaves a $550,000 deficiency the guarantor owes personally.

Source: https://searchspheresource.com/glossary/deficiency
Not dated: A definition is editorial: what a term means, why it matters, and an example. None of it reads a source that can go stale, so there is no date to take and a stamped one would be the build time wearing a costume.

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