Many businesses include a section for a personal guarantor on their credit applications and providing all of the requirements in providing the personal guarantee are understood by the guarantor it is sound commercial practice and should provide an additional layer of comfort to the credit provider.

 

Holding a personal guarantee though does not ensure payment unless the guarantor is solvent.

 

Remember, as part of the credit approval process get a separate credit report on the guarantor, it is pointless having the guarantee if they have no assets or even worse, outstanding debt judgements or an undischarged bankruptcy.

 

To be worthwhile, the guarantee must be supported by liquidity. The checking of the guarantor should be done with no less diligence than that applied to the verification of all the other data that you have collected.