Limited Guaranty

I am closing a commercial loan where there are five different guarantors, each with a different percentage ownership interest in the borrowing entity.  This is a very sophisticated borrower, so it negotiated with the bank for guaranties limited to 150% of each guarantor’s respective ownership interest.  For example, if the loan amount was one million dollars, and the specific guarantor owned twenty percent (20%) of the borrower, then the amount it guaranteed would be a maximum of $300,000.00 of the loan ($1,000,000.00 X 20% X 150%).  Otherwise, the borrower would, together with the other owners, each be liable for the full amount of the loan, $1,000,0000.00.

Mitch