Simple guarantee versus 'as-for-own-debt' guarantee
A simple guarantee can only be enforced once the bank has exhausted its options against the debtor. An 'as-for-own-debt' guarantee (proprieborgen) can be enforced immediately without such a step. Almost every guarantee banks now require is of the latter type.
Cap and time limit
The guarantee should where possible be capped — and the cap should include interest, fees and legal costs, otherwise the total can be materially higher than the nominal amount. A time limit tied to a specific credit prevents the guarantee from 'carrying over' at future renegotiations.
Alternatives the bank normally accepts
A floating charge over the business, a pledge of receivables, factoring or a parent-company guarantee are alternatives that can sometimes replace or limit a personal guarantee. The right combination depends on the company's balance sheet and the bank relationship.
- The 'as-for-own-debt' guarantee is immediately enforceable — treat it accordingly.
- The cap should include interest, fees and costs.
- Corporate security can often replace parts of the personal guarantee.
- Limit the guarantee in time or tie it to a specific credit.
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