Financial Guarantee

A promise issued by an insuring agency that says a debt will be paid, even if the actual debtor is unable to make payments.

If a company is trying to attract backers for a new venture, it will often work with financial guarantee firms to sweeten the pot—and lessen the risk—for any would-be investors.

Think of it like having a cosigner on a car loan: that cosigner is basically promising to make our car payments if we can’t. A financial guarantee works the same way, except usually on a larger scale, since we’re generally talking about huge business expenditures and not a monthly payment on a Hyundai.