Setting up a business - Ways to self-employment

Private guarantees
In the case of private or personal guarantees, private individuals or businesspeople guarantee the repayment of the loan. The bank can demand payment from the guarantor at any time, even if the principal debtor could still pay. Private guarantors generally wish to exert influence on commercial decisions. Furthermore, there is an enormous emotional burden if business starts going badly and the guarantee were to be called in.

Default guarantees
Default guarantees [Ausfallbürgschaften] are provided by the guarantee banks in the Länder. The respective guarantee bank provides a guarantee backing a borrower (commercial company, member of liberal professions) with the borrower’s bank to cover a loan.