What is a loan guarantee fund?

Today we will try to explain the concept of a credit guarantee fund. What does it mean? Who can the local credit guarantee fund help? Why is a surety fund guaranteed and, above all, how do loan guarantee funds work in Poland? We invite you to read!

Credit Guarantee Funds: Definition

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Let’s start with the basics: what is the definition of a loan guarantee fund? The name itself tells us a lot, because the credit guarantee fund is a special organization set up to grant financial guarantees. But, beware – only parties authorized to do so can apply for a guarantee from the credit guarantee fund. What does it mean? One of the most important functions of the credit guarantee fund is guaranteeing, among others, credits or loans that will be used to set up your own business.

How does the credit guarantee fund work?

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But this is not the end! Of course, the strict business profile is inextricably linked to the nature of a particular fund, but certain credit guarantee funds also guarantee loans or credits that a given entrepreneur will use to pay for specific investments. When can guaranteeing the credit guarantee fund be helpful? Such a guarantee may be justified in the case of those enterprises which are expected to provide specific security.

Adequate creditworthiness

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It is worth noting that the credit guarantee fund can grant a guarantee only in a situation where the party seeking such a guarantee wants to incur a specific obligation in the institution with which the given fund cooperates. There are specific restrictions regarding the possibility of granting a surety by the credit guarantee fund, and the entrepreneur who wants to apply for it must meet specific conditions. Among other things, it is necessary to have adequate creditworthiness. That is why, before we start applying for a guarantee by the credit guarantee fund, one should firstly check who actually can apply for it and secondly, what are the conditions for granting such sureties.

The loan guarantee fund can be helpful if the entrepreneur wants to take, for example, a loan or a loan from an institution that cooperates with the fund, but must have specific collateral for that purpose. If it is not present, the surety will be a guarantee of the loan guarantee fund, of course, if the required conditions are met.