Understanding the Guaranteed Loan Portion Amount in Financing
Definition & Meaning
The guaranteed loan portion amount refers to the specific amount of a loan that is backed by a guarantee under certain conditions. This guarantee is typically provided for loans that involve a private loan portion, ensuring that lenders are compensated for any losses incurred if the borrower defaults. The guarantee serves as a safety net for lenders, encouraging them to provide loans that they might otherwise consider too risky.
Legal Use & context
This term is commonly used in the context of financial and lending laws, particularly in relation to military sales and financing. It is relevant in areas such as federal financing, loan guarantees, and foreign military sales. Users may encounter this term when dealing with loan agreements or seeking legal templates that involve guaranteed loan portions, especially when navigating the complexities of federal regulations.
Real-world examples
Here are a couple of examples of abatement:
For instance, if a company takes out a loan of $1 million, and $600,000 of that loan is guaranteed under federal guidelines, the guaranteed loan portion amount would be $600,000. This means that if the company defaults, the lender can claim this amount from the guarantor.
(Hypothetical example) A small business applies for a loan to expand its operations. The lender agrees to guarantee $250,000 of the loan amount, which protects the lender in case of default.