A Guarantor is required for all FLAG loans. In most circumstances, only a single guarantor acceptable to FLAG is required.
Since FLAG does not generally require collateral, the only kind of security for most FLAG loans is provided by the Guarantor.
Since FLAG does not generally require collateral, the only kind of security for most FLAG loans is provided by the Guarantor.
An individual may be a Guarantor. Or, any other entity may be a Guarantor, if legally empowered to do so.
The Guarantor of a FLAG loan will be required to repay the loan principle, if the borrower fails to do so.
The Guarantor of a FLAG loan will be required to repay the loan principle, if the borrower fails to do so.
Faith Communities
Religious congregations help members of their communities is many ways; serving as Guarantor of a FLAG loan is a tangible, practical practice of fellowship and faith in others. The prosperity of local businesses employing local talent strengthens the entire community.
Clergy and lay leaders know the character and talent of the individuals and families who are in their flock. By strengthening members of a congregation, FLAG loans can help strengthen the entire congregation.
Congregations outside the immediate neighborhoods which benefit directly from the vitality of businesses assisted by FLAG loans also have a moral concern about the welfare of others. Whether connected by a common religious denomination or sensitive to the importance of Interfaith collaboration, congregations from within and without the inner-city are encouraged by FLAG to partner as Guarantors of FLAG loans.
Religious congregations help members of their communities is many ways; serving as Guarantor of a FLAG loan is a tangible, practical practice of fellowship and faith in others. The prosperity of local businesses employing local talent strengthens the entire community.
Clergy and lay leaders know the character and talent of the individuals and families who are in their flock. By strengthening members of a congregation, FLAG loans can help strengthen the entire congregation.
Congregations outside the immediate neighborhoods which benefit directly from the vitality of businesses assisted by FLAG loans also have a moral concern about the welfare of others. Whether connected by a common religious denomination or sensitive to the importance of Interfaith collaboration, congregations from within and without the inner-city are encouraged by FLAG to partner as Guarantors of FLAG loans.
Types of Guarantors
Active Guarantors
The guarantee of a FLAG loan provides assurance against the remote contingency of an incurable default by a borrower. But, prudent management requires that FLAG have confidence in the financial capacity of its Guarantors. Furthermore, FLAG relies upon active Guarantor participation in the Loan Committee to follow the progress of a borrower's business in implementation of its business plan and to help FLAG provide or obtain timely additional assistance, if needed. Some Guarantors, however, have limited financial capacity; so, honoring their loan guarantee could incur excessive hardship or become detrimental to the purposes of the program. For these reasons, FLAG and some active Guarantors may appreciate the comfort provided by the inclusion of an Angel Guarantor.
Angel Guarantors
An Angel Guarantor can support a specific loan, a loan Program, or FLAG in general without being a participant on a Loan Committee. If supporting a specific loan, an Angel Guarantor would partner with another Guarantor to share the risk of default in a pre-agreed manner. If supporting either a particular loan Program or FLAG revolving funds in general, an Angel would help protect FLAG against bad debt losses.
Note that the historical experience of Hebrew Free Loan Associations, the business model being adapted by FLAG, has been loan repayment rates of 98% to 100%.
Active Guarantors
The guarantee of a FLAG loan provides assurance against the remote contingency of an incurable default by a borrower. But, prudent management requires that FLAG have confidence in the financial capacity of its Guarantors. Furthermore, FLAG relies upon active Guarantor participation in the Loan Committee to follow the progress of a borrower's business in implementation of its business plan and to help FLAG provide or obtain timely additional assistance, if needed. Some Guarantors, however, have limited financial capacity; so, honoring their loan guarantee could incur excessive hardship or become detrimental to the purposes of the program. For these reasons, FLAG and some active Guarantors may appreciate the comfort provided by the inclusion of an Angel Guarantor.
Angel Guarantors
An Angel Guarantor can support a specific loan, a loan Program, or FLAG in general without being a participant on a Loan Committee. If supporting a specific loan, an Angel Guarantor would partner with another Guarantor to share the risk of default in a pre-agreed manner. If supporting either a particular loan Program or FLAG revolving funds in general, an Angel would help protect FLAG against bad debt losses.
Note that the historical experience of Hebrew Free Loan Associations, the business model being adapted by FLAG, has been loan repayment rates of 98% to 100%.