For many businesses, applying for a bank loan is necessary for the growth and longevity of the company. However, in some cases lenders may ask for additional assurance before granting a loan. They may want to hold a third party liable for the obligations of the debtor in the event they do not fulfil the obligations originally agreed upon. In other words the lender can request a guarantee, a binding legal agreement, whereby the guarantor will on default satisfy the debtor’s obligations.
For example, if a company wishes to apply for a bank loan, the bank may require the director to be held personally responsible for paying back that loan if the company finds itself in a position where it cannot pay off the debt. As you can imagine, this can be of great personal risk and therefore some banks request a certificate from a lawyer stating that the director has received legal advice and fully understand their obligations before signing.