WHO GUARANTIES COMMERCIAL LOANS?
Personal guaranties are required of majority owners and the Chief Executive Officer (CEO) , especially in privately held companies, because they are responsible for the day-to-day operation and financial management of the business. Staff surveyed private and public lenders and verified that standard industry practice requires guaranties from those individuals or entities that control over 10% to 20% of a partnership (not including limited partners) or corporations. Guaranty policy varies when dealing with affiliated businesses. A guaranty is not required from a sole proprietor when the loan is made directly to the proprietor because the proprietor is personally responsible for repayment of the loan if the business defaults. Occasionally, a personal guaranty can come from a third party who has no ownership or operating responsibility, but wishes to support the loan. An example of such a guaranty is a mother and rather guarantying a loan :or their son or daughter. This type of guaranty r
