Loan Guarantees

Loan Guarantees

David FIsher

Loan guarantees
Spoken text 
David FIsher
David FIsher
David Fisher


What are loan guarantees ?


The concept of loan guarantees is completely misunderstood. The words ‘loan’ and ‘guarantee’ do not belong together in much the same way as ‘jumbo’ and ‘shrimp’.

A loan guarantee is a promise by one party (the guarantor) to assume the debt obligation of a borrower if that borrower defaults.It can be limited or unlimited, making the guarantor liable for only a portion or all of the debt.


Sometimes, clients working with business loan brokers ask for a guarantee that theirbusiness funding application will be approved and funding granted. Some loan brokers actually make this guarantee, which in itself is not only unethical but ridiculous since the broker is not the one offering the funds.

For a bank it is unethical to offer a loan guarantee. How can a bank possibly offer a loan guarantee ? When opening a bank account if you ask the bank to guarantee that your money is safe, they will not provide it. 

Loan Guarantee – Logic Reversed

Banks do not give loan guarantees. In fact it is the bank who asks for a guarantee when making a loan, in the form of collateral. Borrowers must learn, accept and understand this. From the perspective of the loan broker, a borrower asking for a loan guarantee is an indication that the borrower is uneducated and more than likely, a shopper.

Asking a bank for a loan guarantee is no different than walking into the bank and telling the manager that you will only submit a credit card application if the bank will guarantee approval and issuance of the card. It just doesn't work that way.

Until all due diligence is completed, until financial statements and business plans have been verified, and until a host of other tasks have been completed, how can you ask for a guarantee? and even then, the bank will not issue a guarantee, although they may issue a Letter of Commitment, but this is not a loan guarantee.

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