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A guarantee often arises when a business applies for a loan but lacks sufficient collateral to assure the lender of recovery in case of default. To mitigate this risk, the lender may request a personal guarantee from the business owner or a willing family member. This means that if the business cannot repay the loan and defaults, the guarantor is responsible for repaying the debt. It's crucial for potential guarantors to consider the implications carefully, as signing can have significant financial repercussions. However, providing a personal guarantee may sometimes be the only option to secure the needed loan.