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If a large corporation takes out a loan, even a substantial one, and fails, the corporation can just go bust and the people behind it have no responsibility. A
by RobotToaster 2y ago
If a large corporation takes out a loan, even a substantial one, and fails, the corporation can just go bust and the people behind it have no responsibility.
A new business generally requires a director's guarantee to get a loan, completely defeating the point of a limited company.
- nerdawson 2y agoA new business hasn't proven itself viable therefore it's a huge risk to a bank. Between personally guaranteeing a loan and not having the funding available at all, I'd take the former. Once the business has been trading for a while and shows it has a working model, it shouldn't have any problem financing without a personal guarantee. Either way, limited liability remains crucial. You're still in control of how much personal risk you're accepting, putting a backstop on any loss.
- vidarh 2y agoBut that's the norm almost everywhere. Try going into a regular US bank and ask for a loan for an LLC. Almost everywhere will expect collateral and/or a business plan and/or personal guarantees if the business is new. Some countries have more risk-averse banks than others, but it's a matter of degree not a fundamental difference, and generally reflected in interest. And it then just changes the calculus of when you look for investors rather than lenders.