AboutFinance Guy Expertise 1. All questions relating to finance
2. All practical aspects of mergers and acquisitions
3. Many general business questions
Experience Considerable experience in the area consisting of 25 years in both consumer and commercial finance and business management, including 15 years specializing in international Mergers and Acquisitions with over $100 billion in assets acquired
Education/Credentials Business administration undergrad
Wharton post grad in finance
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Past/Present clients range from small enterprenurial companies to large multinationals
Expert: Finance Guy Date: 5/13/2008 Subject: loc obtained new business, partner left
Question Our 2 year old business obtained a line of credit thru the bank as a Small Business finance option.
At the time we had 5 partners and each partner signed onto the loc and it was explained to us at the time this was a guarantee for each of us for 1/5th of the total loc if all was used. The entire loc is at limit and one partner has resigned.
Is it up to us as a company to collect on this or would the bank be the collector of the 1/5th of this outstanding debt.
Answer I will give you a finance guy and business guy's perspective/opinion.
First, the bank will probably take no action until you are in default on the loan.
Then it will send notices to the company and maybe to each of you personally, if it gets that far.
You did not say, but I assume that the loan is going into default...
It is probably wise for the 5 of you to get together and discuss the alternatives prior to attorneys intervention, et. al.
One thing you should be aware of...
If the bank guarantee you signed was (as they most are) "joint and several", then the bank has the prerogative to proceed against, and will probably simply go after, whoever has the most assets, and then let the 5 of you struggle over how to split the liability amongst yourselves.
