| Guarantee for business loan Posted by: Mike T. Jun 20 2003, 08:36 PM My partner and I used to own a health food store (actually more of a combination Health food and vitamin store with Organic Cafe). We took a small business loan from a bank to buy inventory, but we have not used it yet. I am no longer involved with the store, but the loan still has several months left. How do I stop my guarantee. I have nothing to do with the business Posted by: loanuniverse Jun 21 2003, 03:20 PMMike: Please take into consideration that I am not an attorney. The bad news is that a personal guaranty usually has verbiage like this: The undersigned: Understands this is a continuing and irrevocable guaranty and is binding on the Guarantor and Guarantor’s heirs, successors and assigns so long as any indebtedness remains unpaid. The good news is that according to you there is no outstanding balance in the line of credit. If I were you, I would prepare a letter to the bank {direct it to the specific officer that signed or handles the relationship}. In this letter you shall state the fact that you no longer have an interest in the borrowing entity {the store} and inform them that you are hereby revoking your guaranty for further advances under the line of credit. I would also tell them that you understand that you are still obligated to pay in case of default for any balance that has been drawn so far. If as you say, there is no outstanding balance, then telling them that will not cost you anything and will show good faith if this matter has to go to trial. On the other hand, if there is a balance already you are liable whether you like it or not. Of course, you should send this letter certified with return receipt. However, while you might still be technically liable for further draws until the line expires, you would have armed yourself with a powerful weapon in case of litigation. A smart loan officer receiving that letter would forward this matter to the bank’s attorney for review and the bank might end up at least temporarily freezing the line. This action might have a negative effect on your ex-partner’s ability to draw on the facility so you should consider that too. Again, this is what I would do. Only an attorney versed in lending law can give you an appropriate answer so I suggest you consult one. |
