Cooperative loan guarantees explained
A guarantor is a member who backs another member's loan, and trouble starts when that promise is made casually. KoopManager offers only members with room to guarantee, needs every guarantor to approve, and shows the Exco how much risk each guarantor carries.
What is a guarantor?
A guarantor is a member who agrees to back another member's loan. If the borrower defaults, the society may look to the guarantor for the outstanding amount. Who may guarantee, how many guarantors a loan needs and what happens on default are set by each society's bye-laws.
The problem: a promise that is easy to make and hard to see
In a society run on spreadsheets and phone calls, a guarantee starts as a conversation. Nothing in it shows what else the guarantor has already promised, how much of the loan is still owed, or what the guarantee does to the guarantor's own ability to borrow.
Who feels it
- Guarantors say yes without knowing what they are committing to, and one generous member can end up guaranteeing more than they could cover.
- Borrowers wait while they chase guarantors one by one, and the Exco learns how exposed a guarantor is only when a loan goes bad.
How KoopManager resolves it
Borrowers choose guarantors only from members with enough free capacity. A loan must be fully guaranteed, and it goes to administrator review only once every guarantor has approved. A guarantee counts against the guarantor while the loan is unpaid and is released as it is repaid, and the Exco can see each guarantor's total exposure in one report.
Related guides
- How to move a cooperative society from spreadsheets to software
- How cooperative dividends work
- The financial reports every cooperative Exco needs
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