Credit Evaluation School - May 2023

Internal Use Only

Types of Guarantees

Unlimited • Full-recourse

Limited • Simple form • Puts a limit on

Joint & Several

• If multiple

guarantees - aka unconditional guarantee • Guarantors pay all amounts due until note paid • Guarantor liable for any debt owed

guarantors, lenders have few options to distribute risk guarantor is fully responsible for entire loan

amount guarantor responsible for • Usually, an agreed upon dollar amount or percentage of total debt

• Each individual

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