Glossary
What is Guarantor?
A guarantor is a person or company that agrees to repay a loan if the borrower cannot. In small business lending, owners are commonly required to act as guarantors, and in some cases other parties such as a spouse or an affiliated business may be asked to guarantee as well. A guarantor takes on real legal liability, and the lender can pursue the guarantor's assets if the business defaults. Anyone asked to guarantee a loan should understand the agreement fully before signing.
Example
Two partners who each own 50% of a company both sign as guarantors on its equipment loan.
Related terms
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