Even though I'm no longer a guarantor—why are 'former guarantors' denied loans?

──The 'gap between policy and credit' visible in the field

1. Introduction──A question from a consultant

This is a straightforward question posed by a client.
They became a joint guarantor for an acquaintance's company several years ago, and the company subsequently went bankrupt.
This is a person who ended up bearing the payment responsibility personally.
Admittedly, the time limit for the accident record on their credit report has not yet passed.
Even after repaying the debt,
they are shunned by financial institutions for loans simply because they have a 'history of being a guarantor.'

It is now said that we have entered an era where guarantors are unnecessary, thanks to things like the 'Guidelines for Personal Guarantees by Business Owners.'
Nevertheless, why does this 'wall of credit' continue to persist?

2. What are the Guidelines for Personal Guarantees by Business Owners?

To begin with, what does an 'era without guarantors' actually mean?

In 2014, the Financial Services Agency and the Japanese Bankers Association formulated the 'Guidelines for Personal Guarantees by Business Owners' after consultation.
This is an institutional framework that encourages reviewing the old business practice where individual owners of small and medium-sized enterprises were unconditionally required to provide joint guarantees for company loans, andmaking personal guarantees by business owners unnecessary for companies that meet certain conditionsis the goal.

The key points are the following three:

• Clearly separating and managing the assets of the corporation and the business owner

• High financial transparency and the ability to repay

• Proper corporate management is being conducted

If these conditions are met, loans 'without joint guarantees' are possible—.
As a system, it is clearly beginning to shift toward an 'era without guarantors.'

3. The reality of credit risk for former guarantors

However, the reality is harsh, contrary to the system.

In financial institution screenings, 'having been a joint guarantor in the past' is sometimes treated as 'a person who previously provided credit enhancement for others.'
Even in cases where the company went bankrupt and the former guarantor actually fulfilled the debt,

• “They have a connection to a company that made poor management decisions”

• “Someone who has experienced debt fulfillment = an individual whose credit risk has materialized”

are how they are viewed, andbeing turned away at the counteris the reality. Even though, in a sense, they have already paid for their 'sins.'

In some cases, this does not disappear after a certain period like credit information, butit may be semi-permanently 'remembered' within the bank as a past guarantee historypotential.
In other words, even though a 'loan system without guarantors' has started, in the field of credit, a 'distortion between policy and practice' where 'past guarantors are not forgiven' is still occurring,a distortion between policy and practiceis happening.

4. How to resolve the 'twist' between law and finance

So, how can we bridge this gap?

I keenly feel the need for someone who can understand and bridge the gap between financial practice and legal affairs.

To achieve this:

• Organizing guarantor history and visualizing the fact of release (e.g., registration, certification, etc.)

• A mechanism for third parties to certify that past debt fulfillment has been completed

• The introduction of 'explicit review policies for those who have been released from guarantees' by financial institutions

These are some of the approaches needed from both institutional and practical sides.

What practical paths are available? I will introduce them separately, including actual success stories.In conclusion, the reality is that we have no choice but to deal with each case individually.

5. Conclusion—Toward a society where 'I am no longer a guarantor' is understood

Credit should inherently be something nurtured by looking toward the future.
Nevertheless, if the 'past' of having once been a guarantor becomes a 'lifelong shadow,' we cannot say that the 'system that makes guarantors unnecessary' is functioning.

The system is already changing.
The issue is how society as a whole shares and implements the 'meaning' and 'operation' of that system.

🔜 Next time preview:
Decoding the graduation process from guarantees through practice and negotiation sites

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