What is a Personal Guarantor and Why Do I Need One?
As leasing for business or commercial use becomes commonplace, it’s time to address the topic of a personal guarantor: what is it and why might your business need one?
The experts at Carlease are here to explain the financial details of business leasing and why a personal guarantor is often needed before your business drives off with a new vehicle or fleet of vehicles.
Not everyone has the luxury of a personal vehicle in which to conduct business, and those who do may not want to rack up extra miles for business purposes. A great solution is a business lease on a new car, truck, or van. With simple pre-negotiated pricing, fixed monthly costs, increased monthly cash flow, and a reduction capital expenditures, more and more business are turning to leasing solutions to meet their transportation needs.
But many businesses, especially newer ones or those who’ve never borrowed before, don’t have enough of a credit history to assure the financier/lender they’re able to consistently make payments on their vehicle(s). Unless you’re a large corporation or your business has built up strong credit over a minimum of three years, banks will often require a personal guarantor on the lease agreement.
Simply put, a personal guarantor gives his or her word that they will be responsible for any payment(s) that the business is unable to meet. Their credit worthiness is used to approve the lease in the business' name. Should the business go under or finances change, the personal guarantor agrees to adopt the monthly payments of the vehicle(s) until the end of the lease. Personal guarantors help you get approved, and can oftentimes lead to a lower lease payment with a strong enough credit rating.
While some may be leery of adding a personal guarantor on a business lease for fear of it affecting their personal credit, this is rarely the case. Provided that all payments are met by the business in a timely manner, the guarantor is merely a safety net, while the business builds up positive credit for the future. In addition, even as a guarantor, the lease typically does not show up on your personal credit report unless you take over the lease from the business.
If you’re looking to lease your next vehicle for personal or business use, let the experts at Carlease walk you through every step of the process, all from the comfort of your home or office. Visit Carlease.com today to view hundreds of makes and models, and when you’re ready, reach out to our leasing experts who will help you find the right car for you. Our personal and small-business leasing experts are standing by to make the leasing process quick, easy and painless.