Client is trying to obtain a commercial loan to construct a new retail strip center. Client is putting down 40% and financing the remainder. Client wants the bank to take a first mortgage on another building that he owns free and clear. Bank is insisting that client also gives a personal guarantee on the loan. Client wants me to avoid the personal loan. I need some recommendations on how to aviod the personal guarantee. Client feels as if teh bank is super-collateralized already, the personal guarantee is unnecessary.

Thanks,

Bank are insistant these days on these personal guarantees. They are not lending money to each other as is evidenced by the number of banks that have closed down these days. Its a hard economy and banks are not making it easier. I wish I had some real advise for you, but this is a tough one. You can try shopping the loan with a smaller bank, they may let it go, but they charge a lot more in fees.

Sumo is correct. In today's market, if you want a commercial loan, you either have to personally guarantee the loan or have a ton of other property which you will extend as collateral.
Another option would be if you have a right to income or payment you can appoint or assign that right to the creditor. This way the creditor has collateral. This is a good option and is being used often by commercial property owners. Just draft an assignment of interest.

Tomas.

Tomas: I watched this thread and liked your idea. I had a client that was in the same situation. We offered an income stream to the bank and they accepted it as collateral. Of course we had to submit financial statements and the income stream was greater than the loan, so they were willing to take it.

Bank will file a security interest (UCC-1) on the income stream and my client doesnt have to sign personally.

Good call. It helped me out and my client was happy.....until he receives my invoice.