Asterisk Financial Inc. has introduced Personal Guarantee Insurance, a new insurance product that protects small-to-medium-size (SMB) business owners, or anyone who guarantees a SMB loan, against major loan-related losses.
Loan guarantors – including business owners, commercial real estate investors and limited partners – can have a substantial portion of their net liability covered if the underlying business should fail.
Asterisk uses a direct selling approach and is initially licensed to offer Personal Guarantee Insurance in Connecticut, Illinois, Indiana, Iowa and Wisconsin, with plans to expand to at least 10 other states in 2010 and 2011.
Today, most SMB owners, limited partners and commercial real estate investors are required to personally guarantee a commercial loan transaction, exposing their personal assets when they take out a business loan. This puts them at risk of losing their home, savings and other personal assets if the business should get into trouble and default on the loan.
Personal Guarantee Insurance from Asterisk assures guarantors that they are protecting their personal assets when they sign a guarantee for a commercial loan.
How Personal Guarantee Insurance Works
If, after liquidating the business assets, the lender seeks personal assets to repay the balance of the loan, Personal Guarantee Insurance will cover a substantial portion of the insured’s net liability, subject to the terms of the policy.
“For years, those taking out business loans have faced the risk of substantial loss of personal property when the value of business assets did not satisfy loan obligations,” said Mark L. Ricciardelli, CEO of Asterisk Financial.
The advantages of Personal Guarantee Insurance include:
- More conducive to business success: Owners and other loan guarantors retain 100% of a venture’s upside potential while transferring a substantial portion of the downside risk. This changes the equation in terms of business focus and commitment of resources.
- Reduces potential for strain and division among business partners: The potential for severe personal losses from a business failure can lead even amiable partners to wrangle over things like acceptable levels of risk and redistribution of ownership stakes. With the protection of Personal Guarantee Insurance, their personal exposure is substantially reduced, allowing them to remain focused on overcoming business challenges and staying on plan.
Source: Asterisk Financial Inc.
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