In lending, to “guarantee” something means that a third-party guarantor will assume the debt obligation of a borrower if the borrower defaults on (does not pay back) the loan.
In lending, to “guarantee” something means that a third-party guarantor will assume the debt obligation of a borrower if the borrower defaults on (does not pay back) the loan.
In business lending, the most popular type of guaranteed loans are those backed by the U.S. Small Business Administration (SBA). The SBA offers a number of loan programs to encourage traditional lenders to work with small businesses by guaranteeing their loans in case of a default. Some lenders are hesitant to work with emerging small businesses, as they are a conventionally risky investment. But, with SBA-backing, lenders are more inclined to loan money to small businesses, which encourages economic growth and entrepreneurship across the United States.
Business loans can also be guaranteed by an individual. In many cases, lenders will require a business owner to personally guarantee a loan. This means that if a business needs to default on its loan, the business owner will be personally responsible for paying it back. By personally guaranteeing a portion of their business loan, some entrepreneurs are able to get better terms from lenders.