Can I use an investor as a guarantor?

February 15, 2025

by a searcher from Syracuse University in Arlington, VA, USA

I'm close to closing a deal, and the bank just requested a guarantor at the last minute before issuing the commitment letter. Would it be possible for an investor to serve as a guarantor?

The investor will be a grantor for only one year and will take 5-7% of the company in this year.

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Depending on what type of financing you are looking for there may be other options. You could certainly use a minority investor to guarantee the loan. The question is going to be how much of a guarantee does the lender want. Do they want a full guarantee or a partial guarantee? Is your investor going to sign a full guarantee with only a partial equity interest in the business? The other issue is that once a guarantor the only way they are going to be released is if the lender approves it. It is often hard to get a lender to come back and release a guarantor in the future, unless they are willing to provide specific provisions up front under which they will do so, which I rarely see lenders do. I would be happy to have a discussion and see if we can provide more advice or assistance. You can reach me here or directly at redacted

Reply by a professional
from University of Virginia in Holmes, NY 12531, USA

Howdy, so in all my experience, that’s (a) really generous of your investor to offer and (b) whether SBA or otherwise, it’s going to be at the lending bank’s discretion, but IMHO most SBA lenders are going to be skeptical of a third party guarantor taking your place, (assuming you’ll own >20%). A co-guaranty might strengthen the loan application. Outside the SBA, I’d say you’re more likely to have this structure accepted. Of course, I don’t know your circumstances, but perhaps the investor kicks in more equity, lowering the debt need and hence lowering the amount needing to be guaranteed. Happy to chat more on it. Best, Matt redacted

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