Loan guarantees or co-signing for cash?

Hi Michael -

Thanks for the response. That would be my rule too, unless I was already considering an equity investment It would be foolish to cosign for something you didn't view as a sound investment on its own.

On the other hand, for an investor who was already considering putting in cash, a guarantee/cosign instead could have the following benefits:

1. less money out of pocket/if CDs are collateral, still get additional interest
2. equity stake
3. substantial fee (10-20% of total amount guaranteed)

You're probably right about bank risk in many situations. Believe me, commercial lenders want to make this work. I'm just trying to feel out all the possibilities. And I guess the nice thing is you can potentially find an investor with more risk tolerance than the bank to partner up with and guarantee the loan.

*all provided the numbers still work for the deal and leave a large amount of cash flow after debt service!

Cheers,
Erik