In one sentence
A third party's promise to answer for the borrower's obligations, in full, in part, or only on specified bad acts.
The longer version
Payment guaranties cover the debt. Completion guaranties cover finishing construction. Carve-out guaranties spring only on specified acts like fraud, waste, or unauthorized transfers. Which flavor applies, and who signs it, is negotiated with the term sheet.
Diligence on the guarantor runs parallel to the borrower: organizational documents for entities, financial statements and net worth covenants either way.
Keep reading