A guarantee can be provided by an individual, a company or another type of corporate entity. In a small business context a guarantee will normally be provided by an individual. In a more corporate environment it’s common for a company to guarantee the repayment of a loan borrowed by a subsidiary company. A guarantee is one of the simplest security documents. It basically states the conditions under which the guarantor w?ill be required to take over the borrower’s repayment obligations upon default. As a lender you want to be sure that the guarantor will be able to satisfy its obligations under the guarantee. As a guarantor you want to be as sure as possible that the borrower will uphold its obligations with regards to repayment. Finally, it’s a good idea to avoid the provision of a personal guarantee if possible as this type of guarantee may expose your personal assets to a creditor. 2. Specific Security Agreement
The manner in which security is taken changed recently with the introduction of the PPSA regime. Before the legislation was passed, lenders would enter into a wide range of security documents with borrowers, such as share charges (a charge over the shares in a company), assignments (assigning your rights over an asset to the lender) or mortgages. The PPSA regime created a new class of security document called a “specific security agreement”. A lender can now enter into a specific security agreement in relation to a given asset, such as a lease or a chattel. Once executed, this specific agreement must be registered with the PPSR register, thus informing any potential future lenders of the original lender’s security. 3. General Security Agreement
Finally, a lender and borrower may choose to enter into a general security agreement. Before the PPSA regime came in, this type of security was known as a “fixed and floating charge”. This is a security agreement that covers all the assets of the borrower. The benefit of using a general security agreement is that you don’t need to list out every single asset that is being used as security, and you don’t then need to register a number of specific security agreements with the PPSR register.
