Springing Guaranty
A guarantee that stays inactive (limited or non-recourse) under normal conditions but converts into a full personal guarantee if specific triggering events occur, like fraud or bankruptcy.
A springing guaranty gives a business owner more limited exposure day-to-day, only “springing” into a full personal obligation if the borrower does something specifically prohibited, like transferring collateral without consent or filing bankruptcy in bad faith.
This structure is more common in larger commercial real estate financing than small business lending, where a personal guarantee is typically either fully in effect or not required at all.
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