I suspect its because he won't have setup the company as one with limited liability: https://en.wikipedia.org/wiki/Limited_liability the result being that when people sued, they sued him personally rather than the company.

It's not always so simple when you're a small company owned by one person. Even if you have an LLC, if you run into significant money problems someone with enough resources WILL come after you personally.

or he had it as an LLC, but made a mistake along the way that pierced the corporate veil. Or as a small business, he was just straight-up forced to pierce the corporate veil. (banks do this to small biz all the time).

If you are a small business with no significant assets or revenue - say you are plugging away making $4k/mo scraping by - you will likely not be getting a merchant account without a personal financial guarantee.

The corporate veil is mostly a fiction for small bootstrapped startups without initial seed capital.

More than likely he borrowed money and despite the entity structure, personally guaranteed it (which is typical for most small business loans)