Student Solution

-->

"Education is the most powerful weapon which you can use to change the world”
– Nelson Mandela

1 University

1 Course

1 Subject

Forum 3 Discussion

Forum 3 Discussion

Q 1. Why do suppliers often ask entrepreneurs of small companies to provide personal guarantees for a line of business credit? If an entrepreneur is asked (forced) to provide personal guarantees, then what personal protection does a company have from the guarantee? How does Proverbs 14:23 provide a Biblical foundation on how to profit? 2. How useful is a financial plan when it is based on assumptions of the future? Does it make more sense for the entrepreneur to evaluate and modify financial plans monthly or wait for results from quarterly reports?

View Related Questions

Solution Preview

Small businesses, especially for new entrepreneurs, do not have reliable credit history that could be independently verified by lenders (Khaitan & Joshi, 2021). These lenders could be banks, suppliers, and real estate transactions. The entrepreneur could be required to provide personal guarantees in which the individual would become obligated to pay in the event that the business could not fulfill its obligations as at when due (Khaitan & Joshi, 2021). Small businesses are flexible in operations and could easily change locations, ownerships, or cease operations without notice. Suppliers could use the personal guarantee as a way to ensure that the business owner would be personal responsible for any outstanding balances owed by the business.