Our bank has decided that now instead of having guarantors who actually sign a guarantee when doing a loan to a corporation, llc, etc., they should only be listed as an individual signer on the loan documents. Our software will not let me title the documents with the individuals names along with the business name, but I can list them as signers, individually. Does anyone see a problem with the individuals names not being a part of the title on the note and other loan documents? & is having them sign the note as individuals better than having them individually sign separate guarantys? Hope this all makes sense.

I'm curious why someone thinks this is a good idea. Do you want the individuals to be co-applicants?

I think the intent is to be co-applicants. Therefore, would their names not need to be in the title on the note????

I think the intent is to be co-applicants. Therefore, would their names not need to be in the title on the note????

Or the better question is, do the individuals intend to be co-applicants with the entity? Do you have a loan application form? Does it indicate intent?

If a bank told me they do not take guarantors on business credit, I'd take my business elsewhere.

you're going to have problems with Reg B!

If they apply together you're fine, but you cannot require them to sign the loan individually.

I would run that scenario by an attorney competent with ECOA and your state's laws. A guarantee would be called if the loan was not paid timely, a co-borrower is on the hook the same as the business. I believe they are different in reporting to the credit bureaus too.

In this new era of lending where millionaires sign guarantees for projects, yet find ways to get out of that guarantee when a project fails, more banks are looking at getting people to sign on the line as personally liable.

From what I'm reading above...if an LLC or Corp applies for a loan, and we also want the principals behind the LLC or Corp to sign individually as a co-borrower, we can't we do it or am I reading that wrong?

What about as a co-signor?

We want to protect the bank from loss by getting these people to back their own projects, but also don't want to violate ECOA.

There is nothing in Reg B prohibiting the bank from requiring the principals to be co-borrowers/signers on the loan as loan as they are not requiring them to sign on a prohibited basis. As the Anon just above points out Reg B specifically allows the bank to require the signature of the principals of a closely held entity.

You do want to run this past legal counsel. It could be construed that they are co-signers and not co-borrower if there are not listed in the Borrower section of your note instrument.

"In this new era of lending where millionaires sign guarantees for projects, yet find ways to get out of that guarantee when a project fails, more banks are looking at getting people to sign on the line as personally liable. "

This is a problem???? In all my years I have not seen too many guarantors skate that actually "had" any assets unless the bank screwed something up. If they are going to skate, it doesn't matter what document they sign.

So, ABC LLC applies for loan. Mr. Smith is President and primary owner, so we could require Mr. Smith to sign as President, and also invididually, correct? I thought I read somewhere on BOL that we would have to get a "Joint Intent" statement in this situation. But, if I'm requiring it, that doesn't make sense.

Or, maybe I read too much and then the my mind starts to commingle facts. I think I want to be a park ranger or something else...

If you are requiring Mr. Smith to sign as an individual based on your loan policy then that is an underwriting condition and joint intent would not be necessary.