Starting and running a small or growing business can be a challenge to the most confident and optimistic entrepreneur.\u00a0 And the process of borrowing money or financing asset purchases can be an eye-opener for those who are not used to today\u2019s lender and seller aversion to granting easy credit.<\/p>\n
Most any entrepreneur with a clean credit record can obtain a bank card with a $50,000 limit, if s\/he is willing to give a personal guarantee and has enough assets to back the promise it contains.\u00a0 As the amounts get higher or as banks get into the picture, the negotiation around a personal guarantee becomes more of an issue with the lender and the entrepreneur.\u00a0 As a rule of thumb, a company with a majority owner in control will be required to provide such a guarantee for most any borrowing of significant size in relation to assets.<\/p>\n
But what happens when the entrepreneur has taken investments from one or more outside investors and may not even own a simple majority of the company\u2019s stock?\u00a0 [Email readers, continue here…]\u00a0<\/em><\/span> To most lenders, the guarantee is still a requirement, putting the entrepreneur in a position of additional risk that is not spread among the shareholders.<\/p>\n At least one company has entered the market providing personal guarantee insurance to bridge this important and uncomfortable gap between risk and comfort.\u00a0 For a fee, insurance can be purchased that will back up most or all of the guarantee in the event of a default, allowing the risk to be mitigated with cash. Since this is a new area for insurance coverage, there is much interest but little experience to create actuarial tables for the insurer or stories to tell for candidate customers.\u00a0 But the very idea is one worth investigating if the problem is one you face.<\/p>\n All entrepreneurs assume risk when starting and growing a business.\u00a0 It is only smart to consider ways to mitigate risks when opportunities to do so arise.<\/p>\n","protected":false},"excerpt":{"rendered":" Starting and running a small or growing business can be a challenge to the most confident and optimistic entrepreneur.\u00a0 And the process of borrowing money or financing asset purchases can be an eye-opener for those who are not used to … Continue reading