# Personal Guarantee



## Cabaiste (20 Mar 2012)

As a member of the management committee of a sports club I am involved in I have been asked would I be willing to offer a personal guarantee for a loan the club is applying for. There will be 6 guarantors in total all of whom are being indemnified by the club.

I don't own a house but I do have a reasonable sum on deposit which my wife and I are saving for a deposit on a house (not in the near future)While I do not know the finances of the other guarantors exactly I know most if not all of them are long time home owners so I'm guessing little or no mortgages.

I understand the premis of jointly and severly liable but my query is can and would the lender target me in particular due to the liquidity of my assets?


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## Wishes (20 Mar 2012)

*While I do not know the finances of the other guarantors exactly I know most if not all of them are long time home owners so I'm guessing little or no mortgages.*

That means nothing in todays day and age. They may have remortgaged etc.

Just my opinion, but I would steer well clear of giving a guarantee to any bank.


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## Gulliver (20 Mar 2012)

If you sign a joint and several guarantee, you should consider yourself liable for the full amount (plus interest).  You should also consider at what stage your guarantee will be released.  Does it only cover this specific loan or does it cover future loans or extensions to this loan.
Gulliver (retired banker)


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## PaddyBloggit (20 Mar 2012)

Stay away from it .... it would be madness for you to give a personal guarantee in this sitaution.


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## RiskAverse (21 Mar 2012)

Personal Guarantees get my goat!! Or whatever the phrase is.

Banks lend money for a fee to cover risk and yet want to take all the risk out of the equation by using fancy and binding leagalise.
Everyone should stay away from personal guarantees.  If your club can't afford it then don't do it.  Same for businesses. Same for all loans. Banks have to lend eventually as part of their business model.... therefore in an ideal world if everyone could and would abstain from PG'S then they would have no option but to lend anyway.

Getting away from the 100% loan mentality is no harm anyway.

4 year ago I tried to take out a lease (30 yr) on a property. The landlord insisted on a PG for the full term and tried to join my parents into it also. I left it.
2 yrs ago i signed a lease for a similar property with a one yrs rent PG as a sweetener.

This yr I signed a lease where the landlord asked for a PG and I laughed.  landlord just said "can blame me for trying"

My bank looked for a PG for a COMPANY CREDIT CARD, which BTW was to be paid by a direct debit from the company current account (never overdrawn)
I changed bank.

Next bank wanted a PG for the ability to pay my staff electronically into their bank accounts.  It's mad! if the monies are not present then don't transfer it!

Moved again

PG'S pi** me off


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## Bronte (21 Mar 2012)

Cabaiste said:


> There will be 6 guarantors in total all of whom are being indemnified by the club.


 
What does this mean? 

If you sign this guarantee and for whatever reason the club does not repay the loan the bank will come after all of you but they will target the one who is easiest to get the money from. If others are mortgaged to the hilt than the easiest mark may be you. 

You should not sign any personal guarantee until you have been given the advice of a solicitor. Unless this is for a relatively small sum of money and you can afford the risk of the total amount. And if you've been asked by others to sign the guarantee you all 6 should be open and honest to each other as to what you are signing up for. Don't be put under peer pressure. 

If you do sign the guarantee make sure it is not open ended, that the amount is clearly stated and fixed, it's duration, and how you can get out of it.


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## Slim (21 Mar 2012)

Cabaiste said:


> ...There will be 6 guarantors in total all of whom are being indemnified by the club.
> 
> I understand the premis of jointly and severly liable but my query is can and would the lender target me in particular due to the liquidity of my assets?


 
Firstly, I don't think having liquid assests will make you more of a target for a bank if all goes wrong. After all, you do not know what assets your co-guarantors have and the bank may not or should not know what assets you have (make sure your savings are not in the lending bank).

Secondly, what is the value of the club indemnity? If it needs to be invoked then surely it would be unable to honour it?

Thirdly, I would suggest avoiding personal guarantee for a club as others have posted here - +1.


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## RIAD_BSC (21 Mar 2012)

Avoid PGs like the plague if you can help it. It's one thing having a PG for your own business if you're trying to keep it afloat. But for a sports club?! Not in a million years would I sign one.

Also, the clubs indemnity is worthless. If the club can't pay back the loan, and the bank enforces the PGs, then being indemnified by the club (which is unable to pay back its loans anyway) is a fallacy.


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## Cabaiste (23 Mar 2012)

Thanks for all the replies, they've been informative and helpful. Just some more information:


The club has a substantial asset in their land which must would be worth far in excess of the value of the amount being borrowed.
Loan is €30k, big but certainly not huge.
Its a credit union loan so we also have to keep €5k in credit union shares as security for the loan.
Credit Union is also taking a charge on the land as security.
The loan represents approx 66% of the total cost of our development. The balance has been funded by grants and money already raised.



Gulliver said:


> If you sign a joint and several guarantee, you should consider yourself liable for the full amount (plus interest). You should also consider at what stage your guarantee will be released. Does it only cover this specific loan or does it cover future loans or extensions to this loan.
> Gulliver (retired banker)


 
The guarantee is specific to 1 loan agreement which is for €30k over a 5 year term.



Bronte said:


> What does this mean?
> 
> If you sign this guarantee and for whatever reason the club does not repay the loan the bank will come after all of you but they will target the one who is easiest to get the money from. If others are mortgaged to the hilt than the easiest mark may be you.
> 
> ...


 
Unfortunately, there is no getting out of it until it is repaid. THats 1 of the clauses of the guarantee. 

The credit union have told us that in a worst case scenario, they will pursue the personal gurantees before pursuing the lands of the club to repay the loan. As I understand it, being indemnified by the club means that in this situation we as guarantors can call on the assets of the club. I think it is probably about PR for the credit union ie they don;t want to be the ones to force the wind up of the club.



Slim said:


> Firstly, I don't think having liquid assests will make you more of a target for a bank if all goes wrong. After all, you do not know what assets your co-guarantors have and the bank may not or should not know what assets you have (make sure your savings are not in the lending bank).
> 
> Secondly, what is the value of the club indemnity? If it needs to be invoked then surely it would be unable to honour it?
> 
> Thirdly, I would suggest avoiding personal guarantee for a club as others have posted here - +1.


 
Thats, a good point about the savings. I have an account with the lender but its not where the bulk of my savings are. They haven't asked for any financial details from my so I would assume they have no idea of my circumstances.

There is no value placed in the indemnity by the club.



RIAD_BSC said:


> Avoid PGs like the plague if you can help it. It's one thing having a PG for your own business if you're trying to keep it afloat. But for a sports club?! Not in a million years would I sign one.
> 
> Also, the clubs indemnity is worthless. If the club can't pay back the loan, and the bank enforces the PGs, then being indemnified by the club (which is unable to pay back its loans anyway) is a fallacy.


 

As I am on the management committee of the club I'm obviously aware of the financial status of the clubs finances. I do feel that the club is more than capable of repaying this loan over the agreed period and to be honest. Its an unfortunate situation and apparently we have borrowed several times in the past from the credit union without having to offer personal guarantees but I suppose with all thats being goiing on with the banks etc over the past few years everyone has to cover their own asses. The problem is that the club really needs to devleop and we could spend 5 more years fundraising and then develop or we can borrow now and spend the next 5 years trying to grow our membership based on the redevelopment.

To be honest, I think I will sign in the end but I'm going to to meet with a solicitor and discuss before making my final decision.

Thanks again for your insights.


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## Jonny (23 Mar 2012)

From experience- Stay as far away from PGs as you possibly can  SURELY the land & the shares should be enough security for the CU  Also if you are buying a house in the future it could count against you for mortgage approval purposes  The lenders have absolutely strangled the natural flow of commerce in this country with these ignorant & in the main unnessary PGs


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## 44brendan (23 Mar 2012)

From the perspective of a Banker I would advise no-one to sign a guarantee unless you are prepared to meet the obligation yourself in the event of any difficulties. By the way, a Bank cannot lend to a Club as it is not a legal entity. The normal requirement in such a situation is that the loan would be taken out in the personal names of the trustees. Unless the club is a limited company any loan would not be enforceable and therefore a guarantee would itself be unenforceable. Check this out with the accountants/solicitors of the Club.


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## kickstart (23 Mar 2012)

First off, I'd be very reluctant to sign the PG. If you decline to sign it, will the loan still be possible if the other club officers decide to sign theirs? Don't let peer pressure force you into giving your signature for a financial commitment you are clearly not happy with.



Cabaiste said:


> The credit union have told us that in a worst case scenario, they will pursue the personal gurantees before pursuing the lands of the club to repay the loan. As I understand it, being indemnified by the club means that in this situation we as guarantors can call on the assets of the club.



If this is the case, and if you sign, have the club indemnify you for the loan, in a written agreement which includes cover for any and all costs you incur if your PG is ever called upon by the CU.



Cabaiste said:


> I think it is probably about PR for the credit union ie they don;t want to be the ones to force the wind up of the club.



Nevertheless, they are the ones with access to professionals who can properly chase down assets which the club can use as surety. You do not - it makes no practical sense for you to put your personal assets at risk, no matter how fond you are of your club.


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