Business Loans that Need Guaranty by:Teeny Ingberg
Businesses will need to borrow a loan during certain periods for its life span
, such as to purchase new equipments, expand the operation, to repay another loan, or to acquire another business. To acquire a loan, you usually will go to a bank or loan company for your capital needs. There are a few things you will need to consider like we discuss in this article.Typically, bankers require a personal guaranty when you are securing a commercial loan, especially if you cannot offer collateral owned by your business. The personal guaranty provides that if your corporation defaults on the note signed by the business, you are personally responsible for the debt. You are right that one of the main advantages of incorporating is to protect your personal assets from the debts of your business. But the personal guaranty could impact this advantage.
Lenders are reluctant and take great caution when lending money to try to protect themselves. They typically require both a primary and a secondary source of repayment to ensure they can collect on a loan. The primary source could be the firm revenue flow and the secondary source the sale of collateral. Seldom will they lend money in the hopes of collecting on the collateral if you default. They want their money back with interest payments, not your property or business.
Also, most bankers will insist on your signing a personal guaranty to make certain that you and your management team have maximum motivation to pay off the loan. They explain that they are testing management faith in the business, and ensuring that you and your managers devote all your efforts to operating the business profitably. There are many useful financial tips at http://www.fidetips.com/finance for you to read.
If you fail to pay, lenders want to ensure that the borrower can repay the debt with secured collateral. If your business is without collateral, the banker will look to the owners. Lenders always will like a form of compensation for their money that they lend to you.
If there are multiple owners, the bank will ask that all of them guaranty the loan, and each will be jointly and severally liable. This means that the owners will be liable for the entire amount. If your co-owners are not as solvent as you, then you will be liable for the entire amount. There for you will need to study and decide how you will like to apply for a loan, especially a loan that will need personal guaranty.
About the author
Teeny is a writer for finance, computer, travel, cars, shopping and other subjects for many years, please visit http://www.fidetips.com/finance for more information. India: Favored Destination for Offshore R&D by:Anand Kuppuswamy Do Everything Possible to Protect your Dollar Store Business from Theft by:Bob Hamilton Is It Time to Get Creative with your Dollar Store Merchandise Buying by:Bob Hamilton Dealing with Tight Margins When you Own a Dollar Store by:Bob Hamilton You Dont Need to Go It Alone when Opening a Dollar Store by:Bob Hamilton 8 Mistakes to Avoid When Opening a Dollar Store by:Bob Hamilton The Benefits of Creating Your Own Commercial Cleaning Business by:Jeremy Gray Foolproof Method to Hit Your Goal Every Time! by:Nancy drager Due Diligence by:Patrick O Connor Leadership Principles - Kill Blame Culture! by:Terrie Anderson Three Easy Steps to Risk Management by:Simon Buehring Getting it in perspective with M_o_R by:Simon Buehring Stimulus Questions No One is Asking by:Butch Grimes