Few things are more important to bankers than the financial health of local business owners and operators. Not only do these people help drive your local economy and fill important community leadership roles, but deposits they make and other financial activities they conduct are vital to your bank’s success.
Similarly, local businesses count on your bank to provide the capital that is the lifeblood for small business growth. This synergy between bank and customer makes bankers highly interested in the future viability of their borrowers. Personal Guarantee Insurance™ protects that viability in cases where an inability to repay a business or commercial real estate loan leads to business foreclosure.
Bankers are embracing the concept of Personal Guarantee Insurance
Along with the advantages to business customers, this innovative new risk solution can provide benefits for your bank. Personal Guarantee Insurance results in an improved collateral position on covered loans. That’s something any lender can appreciate. What’s more, offering this unique, much-needed product to your business borrowers will build trust and enhance your customer relationships.
Some details on Personal Guarantee Insurance
Personal Guarantee Insurance protects the business owner against financial ruin if something unforeseen and catastrophic were to happen to his or her business. It does this without complicating or altering the way bankers and businesses work.
Personal Guarantee Insurance allows bankers to gain signed guarantees in their usual manner and also motivates business owners to operate as usual.
Personal Guarantee Insurance is not a credit enhancement. Coverage is not intended to improve or enhance the condition of a borrower’s collateral and enable his or her business to get a loan it otherwise might not qualify for.
The policy is only offered for a limited time after the loan closing. This practice avoids the risk of borrowers applying for insurance after the business is already having difficulties.
The insurance claim is limited to 30% to 70% of the guarantor’s net personal payment after all business collateral is liquidated, depending on the coverage purchased and the terms of the policy. Even when the business owner is facing severe challenges, this feature guards against creating a disincentive to successfully operate the business.