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Are you then personally liable for the loans? Or are they made against the business assets? In other words, if you fail to repay the loan will you typically los
by anonymousDan 3y ago
Are you then personally liable for the loans? Or are they made against the business assets? In other words, if you fail to repay the loan will you typically lose your house?
- bux93 3y agoTypically, business loans are secured against the assets of the company as well as the personal liability of partners (even if it's a limited liability company). But if the company borrows tens of millions of dollars, the home (which itself will already be financed, so realistically only the home equity) of the founder/owner of the company is small compared to the company's financing needs. Banks will prefer that the management 'have skin in the game', but from a purely recovery perspective ('loss given default', to the bank) it's negligible. So, non-recourse loans will be typical for large corporations. Unless they're owned by a billionaire. This is why you and your spouse have a prenuptial agreement that keeps your finances separate, and the house out of reach of your creditors.
- thelastgallon 3y agoI'd assume most of these loans are backed by a govt program: SBA loans, farm loans, etc. Same as Fannie Mae for mortgages. Banks don't want to take any risk, only risk free profits.