Question

Because bankers and other creditors want assurance that the money they loan to a corporation is secure, they often require owners of closely held corporations to personally guarantee loans made to the corporation. Therefore, owners of small corporations are often only shielded from product liability and malpractice type judgments brought against the business. Do you think this is a fair requirement by the banks or creditors?

Answer 1

Answer)

Here,I would say that it is a fair requirement by the banks or creditors as the owners due to the treat that their personal property will also be in trouble along with their investment and hence,their involvement in business will be improved and as mentioned above they try to be careful. However it can be dangerous also as the owner in fear to such guarantee may do window dressing also to avoid risk from banks or creditors.

Hence,it will be based on theowner himself and it would be better only when the loans are guaranteed to the extent of assets held by the corporation.