Credit Evaluation School Dec 2022
Internal Use Only
Types of Guarantees
Unlimited • Full ‐ recourse guarantees ‐ aka unconditional guarantee • Guarantors pay all amounts due until note paid • Guarantor liable for any debt owed
Limited • Simple form • Puts a limit on amount guarantor responsible for • Usually, an agreed upon dollar amount or percentage of total debt
Joint & Several
• If multiple
guarantors, lenders have few options to distribute risk guarantor is fully responsible for entire loan
• Each individual
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Internal Use Only
Types of Guarantees
Performance • Guaranty that may not be based on payment • Based on certain conditions or milestones • In CRE, based on specific actions
Carve Out • Aka “bad boy” guaranty • Ties liability to bad acts
• Usually found on non ‐ recourse loans & includes borrower’s promise to abstain from certain acts • Gives lenders control to recoup payment quickly during legal process
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