guarantor

noun
guar·​an·​tor | \ˌger-ən-ˈtȯr, ˌgär-, ˌga-rən-;ˈgar-ən-tər, ˈgär-, ˈga-rən- \

Definition of guarantor 

1 : one that gives a guaranty (see guarantee entry 1 sense 3)

2 : one that guarantees

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Synonyms for guarantor

Synonyms

backer, patron, sponsor, surety

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Examples of guarantor in a Sentence

the town police force is the guarantor of our safety

Recent Examples on the Web

The United States previously pushed back against Bahrain on human rights matters, using its influence as the island's defense guarantor, with over 7,000 U.S. troops attached to a sprawling base in Manama that hosts the Navy's 5th Fleet. Fox News, "Bahrain prosecutors charge 169 over alleged militant ring," 25 Sep. 2018 Many times parents act as guarantors for their children. Taylor Mead, House Beautiful, "What Every Renter Needs To Know About Getting A Guarantor," 21 Sep. 2018 Now, a disappointing second season isn’t an absolute guarantor of doom. Todd Vanderwerff, Vox, "Why the era of Peak TV is the era of the disappointing second season," 1 Aug. 2018 Fannie, Freddie, and any rivals would be overseen by a government entity with power to approve guarantors, change regulations, and ensure market participants are adequately capitalized, the report said. Gregory Mott, BostonGlobe.com, "Fannie-Freddie rise as White House proposes privatization," 22 June 2018 What can serve as the guarantor of such a treaty if not U.S. forces? William A. Galston, WSJ, "Trump Needs to Learn How to Trust," 8 May 2018 Fannie, Freddie and any rivals would be overseen by a government entity with power to approve guarantors, change regulations and ensure market participants are adequately capitalized, the report said. Bloomberg, latimes.com, "White House wants Fannie Mae and Freddie Mac privatized," 21 June 2018 Residents could also return to their homes with Russian military police acting as guarantors of their safety. Nabih Bulos, latimes.com, "Rebels surrender southern Syrian enclave, handing Assad another major victory," 7 July 2018 The statement adds that ARK Group is hopeful that Big Beat Dallas and the lease guarantor, Restaurants Unlimited, will work out a plan to resume operations. Robert Philpot, star-telegram, "Something big is going to stop beating at Toyota Music Factory (update No. 2)," 29 May 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'guarantor.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of guarantor

circa 1828, in the meaning defined at sense 1

History and Etymology for guarantor

see guaranty entry 1

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Statistics for guarantor

Last Updated

16 Nov 2018

Look-up Popularity

Time Traveler for guarantor

The first known use of guarantor was circa 1828

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More Definitions for guarantor

guarantor

noun

Financial Definition of guarantor

What It Is

In general, a financial guarantee is a promise to take responsibility for another company's financial obligation if that company cannot meet its obligation. The entity assuming this responsibility is the guarantor.

How It Works

Let's assume XYZ Company has a subsidiary named ABC Company. ABC Company would like to build a new plant and thus would like to borrow $10 million from a bank. The bank will probably require XYZ Company to provide a financial guarantee of the loan. By doing so, XYZ Company becomes a guarantor -- it agrees to repay the loan using cash flows from other parts of its business if ABC Company is unable to generate enough cash on its own to repay the debt.

Often a parent company will offer a financial guarantee of bonds issued by one of the parent's subsidiaries, but there are plenty of other situations that might involve guarantees. For example, vendors sometimes require customers to become guarantors if the vendor is uncertain about the customer's ability to pay (this most often happens in transactions involving expensive equipment or other physical property). In these situations, a customer's bank might be a guarantor of the customer's payment, meaning that the bank will pay the vendor if the customer does not.

Financial guarantors don't always guarantee the entire amount of a liability. In bond issues, for example, the financial guarantor might only guarantee the repayment of interest or principal, but not both. Sometimes more than one company can be the guarantor on a security; in these cases, each guarantor is usually only responsible for a pro rata portion of the issue, but in other cases, each guarantor may be responsible for the other guarantors' portions if they also default on their responsibilities.

Railroad companies are well-known for their guaranteed bonds because in order for a railroad company to lease another company's railroad, the lessee must often guarantee the debt of the lessor.

Why It Matters

Financial guarantees mitigate risk, but it is important to note that they do not make a security risk-free. After all, it is still possible that even the guarantor can default on the liability if the liability is too large or if the guarantor is already struggling for other reasons. Regardless, guarantees provide an extra layer of security, which is why guaranteed securities often get higher credit ratings.

Historically, financial guarantors disclosed the nature and size of their guarantees in the notes to their financial statements. It is important to note that guarantees issued between parents and their subsidiaries do not have to be booked as balance sheet liabilities. Examples of this include a parent's guarantee of a subsidiary's debt to a third party or a subsidiary's guarantee of the parent's debt to a third party or another subsidiary.

All financial guarantees must, however, be disclosed. The guarantor must disclose the nature of the guarantee (terms, history, and events that would put the guarantor on the hook), the maximum potential liability under the guarantee, and any provisions that might enable the guarantor to recover any money paid out under the guarantee.

Source: Investing Answers

guarantor

noun

English Language Learners Definition of guarantor

finance : a person who promises to pay back a loan if the original borrower does not pay it back

guarantor

noun
guar·​an·​tor | \ˌger-ən-ˈtȯr, ˌgär-\

Kids Definition of guarantor

: a person who gives a guarantee

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guarantor

noun
guar·​an·​tor | \ˌgar-ən-ˈtȯr, ˌgär-; ˈgar-ən-tər, ˈgär- \

Legal Definition of guarantor 

: one that makes or gives a guaranty

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Comments on guarantor

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