What is a guarantor and how is it different

2 min read

Third partyGuarantor

The directorPersonal guarantee

Personal riskBoth create it

How they differ

A guarantor is anyone — a director, another company, sometimes a parent business — who agrees to cover the debt if the borrower defaults. A personal guarantee is the specific case where a director of the borrowing company gives that promise, exposing their personal assets. In both, someone stands behind the company's debt, setting aside limited liability for the guaranteed sum.

What this means for your company

Whoever guarantees takes on real personal or corporate risk, so the guarantee terms — cap, duration, joint-and-several liability — matter as much as the loan itself. Where you can, avoid giving one: Credicorp lends to the company with no personal guarantee and no third-party guarantor, so no one has to stand behind the debt personally.

What it means for you

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.

Frequently asked questions

Can a guarantor be another company?

Yes. A parent or associated company can guarantee a subsidiary's borrowing. Whoever guarantees is liable up to the agreed amount if the borrower defaults, so the guarantee terms need the same scrutiny as a personal one.

Is a guarantor's liability capped?

Only if the guarantee says so. Like a personal guarantee, a guarantor should negotiate a cap and a clear end date. An uncapped guarantee exposes the guarantor to the full debt plus costs.