Loan guarantee

Loan guarantee

A loan guarantee is a promise by a government to assume a private debt obligation if the borrower defaults. Most loan guarantee programs are established to correct perceived market failures by which small borrowers, regardless of creditworthiness, lack access to the credit resources available to large borrowers. [Riding, Alan L. "On the Care and Nurture of Loan Guarantee Programs." "Financing Growth in Canada". Paul J. N. Halpern, ed. University of Calgary Press, 1997.]

Loan guarantees can also be extended to large borrowers for political reasons. For example, Chrysler Corporation, one of the "big three" US automobile manufacturers, obtained a loan guarantee in 1979 amid lobbying by labor interests.

Programs and agencies

United Kingdom

*Small Firms Loan Guarantee

United States

*Fannie Mae
*Export-Import Bank
*Federal Family Education Loan Program
*Freddie Mac
*Government National Mortgage Association
*Small Business Administration
*VA loan


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