Owners don’t run a business expecting it to fail. But sometimes, businesses do just that. Even those with a great idea, a strong team and a growing market can be brought down by events or market cycles out of their control.
For many small and medium-sized business owners and investors, the personal guarantee is a fact of life. Those who sign – known as guarantors – experience the financial and emotional stress that comes with risking the loss of their house, savings and investment accounts and other personal assets.
To give guarantors some well-earned peace of mind, we created Personal Guarantee Insurance™. Your policy, subject to the specific terms and conditions, will cover a substantial portion of guarantors’ personal payments to a lender if the liquidation value of the underlying business was not sufficient to repay the bank loan.
Until now, business owners and other guarantors had to risk personal financial ruin. But with the introduction of Personal Guarantee Insurance, they can preserve more of their assets and continue to pursue success.
How Personal Guarantee Insurance Works
Personal Guarantee Insurance gives small and medium-sized business owners and commercial real estate investors protection for personal assets when they sign a personal guarantee for a commercial loan. If, after liquidating the business assets, the guarantor must use their personal assets to repay the balance of the loan, PGI will cover up to 70% of the insured’s payments, depending on the coverage purchased and the terms of the policy.
Why doesn’t the policy cover 100%? Because Personal Guarantee Insurance is not meant to entirely eliminate the insured’s risk, but to share it. If the insurance were to cover 100% of the loss, then the borrower would have little incentive to resolve or address any operating issues in times of trouble. Instead, by covering up to 70% of the guarantor’s net personal payments, the policy provides the insured with a safety net without eliminating the motivation to overcome difficulties and restore the health of the business.
Personal Guarantee Insurance is an annual policy, with a premium based on the size of the loan and the risk characteristics of the underlying business. The insurance is available only after the commercial loan has been originated and only for a limited time after the loan closing.
Benefits for Business Partners
In a partnership, a personal guarantee can put a spotlight on the different ways partners react to risk. This can create distractions and conflict at a critical time for the business. The financial and emotional safety net provided by Personal Guarantee Insurance can help eliminate these obstacles and make it easier for partners to stay focused on running a successful business.
Not all businesses will qualify for coverage. Those that do must meet the eligibility criteria established by our underwriting team. Our criteria are based on the:
- Financial performance of the underlying business
- Size and structure of the loan
- Financial health of the guarantor(s)
Asterisk Financial, Inc. The Creators of Personal Guarantee Insurance
Asterisk Financial, Inc. (Asterisk) developed the Personal Guarantee Insurance policy, creating a new category of insurance designed to offer relief from the emotional and financial hardship that can result from signing a personal guarantee.
Asterisk is run by a seasoned management team with knowledge and understanding of the challenges and rewards associated with operating a business.
Get More Information
Asterisk will answer your questions, discuss how Personal Guarantee Insurance can help protect your personal assets and provide you with a quote. For assistance, simply call one of our licensed representatives at 1.888.643.8744 (Monday – Friday, 9 am to 5 pm ET).