What Is a Loan Guarantee?

Loan guarantee refers to the legal act that banks require borrowers to provide guarantees to guarantee the realization of loan claims when issuing loans. In terms of risk control in loans, banks are reluctant to invest in small loans. One important reason is that banks have higher management costs for such loans. The benefits are not obvious. For this type of loan, the guarantee institution can optimize the management process in the loan to form a personalized service for post-loan management, sharing the management cost of the bank, and avoiding bank worries.

loan guarantee

Loan guarantee refers to the legal act that banks require borrowers to provide guarantees to guarantee the realization of loan claims when issuing loans. In the loan business

Loan guarantee methods: loan guarantees are guaranteed, mortgaged and

Borrowers have mortgages on their assets . Why not borrow directly from banks?

This is because the marketing cost of bank microloans is relatively high, and it is difficult for small businesses to apply for loans directly from banks. This has caused small and medium-sized enterprises to seek help from financing institutions such as guarantee institutions, and the cost of guarantee institutions to select customers is relatively low. , Choose high-quality projects to recommend to cooperative banks from them, and increase the success rate of financing, which will reduce the marketing cost of small loans to banks.

In addition, in terms of risk control in loans, banks are reluctant to invest in small loans. One important reason is that banks have higher management costs for such loans. The benefits are not obvious. For this type of loan, the guarantee institution can optimize the management process in the loan to form a personalized service for post-loan management, sharing the management cost of the bank, and avoiding bank worries.

Secondly, after the risk is released, the advantages of the guarantee institution are even more irreplaceable. Bank direct loan projects are at risk. Disposal of collateral often has a long cycle, high litigation costs, poor realisability, and cash compensation by the guarantee institution. In order to solve the problem of difficulty in bank disposal, some guarantee institutions can repay the loan overdue within one month (investment guarantee or even 3 days). The bank's non-performing loans are eliminated in time, and then the guarantee institution will deal with it more flexibly than the bank. Means to mitigate risks.

By making the bank fully guarantee the company's post-lending management and loan maintenance standards and efficient operations, some cooperative banks outsource post-lending collection and loan asset disposal to the guarantee company, and both parties have achieved relatively good cooperation results.