If a loan is secured by a limited corporate guarantee, what is the lender's recourse if the borrower cannot repay the debt?

When a loan is secured by a limited corporate guarantee, the lender's recourse is to pursue the assets of the company as defined by the terms of the guarantee. A limited guarantee specifies that the guarantors agree to be responsible for repayment up to a particular limit or under certain conditions, which means that the lender can only recover the amount specified in the guarantee from the company's assets if the borrower defaults.

This implies that the lender does not have access to the full range of corporate assets or, in some cases, personal assets of the guarantors, limiting recovery to a particular dollar amount agreed upon. Such a structure is often utilized to mitigate risk for the lender while also allowing the borrower to secure financing with the understanding that liability is capped.

In contrast, pursuing personal assets of the borrower is not applicable because a limited guarantee restricts liability to corporate assets. Writing off the debt would not be a preferred course of action for the lender unless all collection efforts have been exhausted and no recovery is possible. Charging higher interest rates is not directly related to the security provided by the guarantee but may depend on creditworthiness or market conditions rather than the nature of the guarantee itself.