Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
from my experience.. if your borrowing from a commercial bank PGS are required for the entire length of the loan.
everything is negotiable of course depending on the strength of the borrower but most commercial banks in the US its in their bylaws they simply do not do loans with out them.. same with most HML ers.
when you get to very large agency debt type loans then PGS are not used.. since very few would have the means personally to pay off huge loans anyway.. they are moot..
One thing we did with our credit lines pre 08 we had multiple 5 million dollar lines with 6 banks.. these were one year revolvers.. IE matured every year.. we stipulated and the banks agreed if they did call the loan we would have 36 months to retire it.. and when 08 hit we needed that.. the borrowers who did not have those clauses were the ones that got hammered .. my partner owns a bank it was his clause.. SMart dude but now I know LOL
Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes
7y
I once worked in Credit and Finance in major corporations and dealt with PG (personal guaranty). However in the real estate business, I have not provided any as a borrower, though I have provided them for my SBA loans where the business is in an LLC. For my tenants, I only did it a few times with parents of college students.
PG ranges from unlimited and/or unconditional, to limited and conditional. Complications in commercial financing where over time, customer balances varies, business conditions vary, which accounts for sharp business owners to be careful. See: Personal Guaranty
First, we got limited guaranties, where it is valid for a period of time, then expires. We also have limited and conditional guaranties, when it is good for lets say, the 1st $100,000. We have a few major customers that fall into these categories.
One major memorable customer provided a guaranty that expires annually for $100,000. Over time, his balances greatly exceeded that, but he refused to increase it. Finally, my management told him we will limit our financing to $100,000 if not changed. So I negotiated a second separate guaranty, also expiring annually, but different anniversary dates, but only for balances that exceed $200,000. So if he owes $250K, the first $100K is covered under the 1st PG and the $50K beyond $200K under the 2nd PG.
Complicated enough?
I learned later that the owner of the business was the former campaign manager for President Jimmy Carter when he ran for governor of Georgia, so my company gave him special consideration. I didn't mind taking business trips all the way in the south, going from NY to GA several times a year, and then treated royally. Seems everyone in town knew who he was and we're all treated well.
But for mortgage loans, rental leases, doubt any lender and landlord would spend so much time and effort to negotiate such complicated PG's.
