Business credit and personal guarantees: application and interpretation

1. 3.1

   A grantor taking this route is underwriting the company. It is looking for evidence that the entity exists in its own right and has met obligations in its own name.

2. 3.1.a

   That evidence is ordinarily separation and record: a bank account, filings and a tax identification held by the entity, and accounts already settled on terms under that name.

3. 3.1.b

   It accumulates in sequence and cannot be assembled at the point of application. A business that has not yet held an account in its own name has nothing to show under this Part, whatever its revenue.

4. 3.2

   What this route asks in place of a signature is time, and acceptance of narrower terms while that time passes.

5. 3.2.a

   A grantor with no recourse to a person commonly starts with a smaller limit, a shorter settlement period, or a deposit or security held against the account, and revisits those after the account has performed.

6. 3.3

   The consequence of default under this Part falls on the entity: its record, its remaining facilities and its assets. That containment is the reason the route is worth the wait, and it is the only thing it buys.

Worked through in Separating Business Credit From Personal Credit, How to Build Credit That Stands on the Business and Business Credit Without a Personal Guarantee.

1. 4.1

   A grantor taking this route is underwriting the person. The company's own record is still read, but it is no longer what the decision rests on.

2. 4.1.a

   What is examined is accordingly personal: the applicant's own credit record and obligations, and in many cases a statement of personal assets.

3. 4.1.b

   It is available immediately and does not accumulate. A business formed this month can obtain credit under this Part on the strength of a record built long before the entity existed.

4. 4.2

   What this route asks in place of time is the signature, and the exposure that the signature carries for as long as it stands.

5. 4.2.a

   A grantor with recourse to a person commonly opens on wider terms than it otherwise would, and the scope of the guarantee - what it covers, for how long, and how it ends - is set by its own wording rather than by the account it was signed for.

6. 4.3

   The consequence of default under this Part reaches the person: their record, their obligations and their assets, irrespective of the limited liability the entity otherwise provides. That reach is what the wider terms are priced against.

Worked through in How to Build Credit That Stands on the Business, Where the Liability Really Sits: Guarantees, Entities and Credit and Guarantee and Liability Terms, Explained.

1. 7.1

   Every matter listed in Part 2 is published, and each is linked from the contents. The comparisons, roundups and readings in the menu above make up the body of this edition.

2. 7.2

   Nothing on this site has been tested, trialled, scored or ranked, and no such work is described anywhere on it. Its figures are prices read from providers' own pages, each dated, and material from official sources named on the page that uses them.

3. 7.3

   This book is general commentary on how business credit and personal guarantees work. It is not legal, tax or financial advice, and a guarantee should be read - or read to you by someone qualified - before it is signed.

4. 7.4

   Some links on this site earn a commission. That is disclosed in the footer and on the affiliate disclosure page.

Worked through in What Is a Personal Guarantee, and What Does Signing One Mean?, Business Credit Without a Personal Guarantee and Personal Guarantees: Common Questions.