I might be misunderstanding your comment, but neither of us lives in state.

@Jonathan Justiniano maybe I'm misunderstanding the financing.

So i'm not sure how those things would get missed unless there was a complete misunderstanding on what you wanted to do and what he quoted you for.I'm not picking anyone's side, but having those things in writing is important especially for those type of issues.

That there was some type of misunderstanding. 

I think you might be misunderstanding hard money loans, many of them will not require personal guarantee and can be non-recourse.

Am I misunderstanding something?

Maybe I'm misunderstanding Lenders vs mortgage or something. 

Have a CPA run both scenarios for you since it seems to be a new area for you and if you misunderstand the best way to do this you may end up paying thousands in taxes more than you need to.

Insurance also doesn’t protect you from misunderstandings, especially those made in writing and email.

If he's telling you this before he starts work I'd give him the benefit of the doubt that it's a misunderstanding and I'd consider his new price.I don't know enough details to give you advice but based solely on what you've said I would stop everything until this gets worked out.