How to De-Risk the Personal Guarantee

Of this, but the, what you want to do when you're going through these situations is really be cooperative with your lender and be able to come up. With a way to work with them. What a lot of entrepreneurs that happens is they, they get scared and then they disappear, which unfortunately is the worst thing that can happen, because then your collections go over to the US treasury and the amount you…

And what we're trying to do is again, keep you in that cooperative phase with your lender so that you can work out a way to potentially have a payout plan or come up with some way to avoid those more draconian consequences when it goes over to the treasury itself. A lot of times, some of the folks we've spoken to that are potential insured individuals already come to the table with a lot of…

And so in that case, yes, you're totally right, they still may lose that entire million, but it's protecting and shielding their additional assets if they have assets that are over that 1 million. And that's what's been really interesting to us as we've spoken to a lot of folks that say, hey, I've been on the sidelines for two years because I'm so scared of this.

And the call I'm having with you is something that can help me actually unlock getting a deal across the line that I can go to my family, I can go to my spouse and really explain this. And that was really our goal of what we're trying to do is not solve the pain point entirely, but provide a tool for a lot of those mid late career operators to just think about that risk on a holistic basis.

Good, framing the holistic basis because I think I was oversimplifying where if the business is in default, you lose everything as if there's some binary outcome. And of course there's a whole spectrum of outcomes.

And if you're somebody with resources already, like you said, a balance sheet of two or three million dollars, let's say, and your business fails, you may be able to absorb the entire pay down the loan personally without even going into bankruptcy. But then you've just depleted your family's, all of your family's resources or some significant percentage of your family's resources. And so to have…

Yep.

Yeah. Okay, let's actually get into the kind of philosophy of this a little bit. One of the other things that jumped out at me and others that I've talked to about this is, is the, is the idea that the personal guarantee, as much as kind of we all hate it, it does serve an important purpose of skin in game, serious skin in game.

And so their, their one reaction to this whole category of product might be that are we facilitating bad behavior by taking away or mitigating some of the teeth of the pg? Your response?

That's another important part of why we're doing 50%. We want to keep this alignment of incentives between the lender and the borrower. We want the skin in the game to exist.

We just don't want the downside risk to be potentially catastrophic. That's what we're trying to take away with this insurance policy. Take what can be a truly catastrophic risk.