We use commercial loan guarantees that cover all present and future loans to that business.

Under Reg B, we can't require an outsider (someone other than an officer or owner of the business) to sign the guarantee unless we can show that the business would not have qualified for the loan without it. So what happens if that business later qualifies for another loan from us without the outsider's guarantee? Wouldn't we cause a Reg B violation since that guarantee on the previous loan automatically attaches to the new loan forcing the outsider to guarantee a loan that didn't need it?

No takers?

Should I try to restate my question for clarification, or is everyone else just in the same boat and none of us knows what to do about this type of guarantee?

My 2 cents.

Eventually unlimited guarantees will be a thing of the past because of the signature limitations under Reg. B.

Is that because in your view an unlimited guarantee creates Reg B violations when it causes the outside individual to automatically guarantee a loan that already qualifies without the need for an additional guarantor?

Yes, that is my opinion. Once the company qualifies - where's the legitimate business reason to have the "outsider" continue guaranteeing the loan?

Thanks for the feedback. That's my concern too.

- Is anyone else using them?

- Has anyone else stopped using them for this reason?

I am not sure whether to agree or not. What we do is to not have outsiders guarantee loans. The idea would be the desperation issue. We use unlimited guarantees from "related" or principal parties, that is kind of an unwritten policy. My questions would be: If you have to work that hard to approve the loan, what kind of risk are you taking on? How many guarantors of what quality does it take to overturn a denial, just do the loan to the guarantors.

Just my opinion.

You could use "unlimited" guarantees for insiders, but I would use specific guarantees for outsiders. I think that would solve your Reg B dilemma. If an insider left the company, you could always exclude a specific loan from the guarantee through the loan agreement.

I was doing some reg B research and found out something interesting too. Maybe you get the outsiders to do specific guarantees or "intent to guarantee" or some thing like that. I apologize for bringing up the issue and not having my research in front of me. I found it by searching for "joint intent" in the threads. I have also heard of some unlimited guarantees being contested because the new loans were not known by the guarantors. I urge our lenders to get new unlimited guarantees with each new "significant" loan. Just my two cents.

Thank you both. I think we're going to work with the loan policy makers on this and try to restrict the use of unlimited guarantees to inside guarantors and use specific guarantees for non-owners / non-officers. We've also considered the idea of modifying the statement of intent to apply for joint credit by adding a place for guarantors. While I think I understand the Fed's logic in making the statement of intent only for applicants, I think it would have been much more workable if it would have somehow documented guarantors too.