Fact Pattern 28-1B
Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds.
-Refer to Fact Pattern 28-1B. If First National insists that Cliff sign the loan applica?tion, making himself personally liable for payment whether or not Beta defaults, Cliff will be
A) a guarantor and a surety.
B) a guarantor only.
C) a surety only.
D) neither a guarantor nor a surety.

Question

Fact Pattern 28-1B 
Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds.
-Refer to Fact Pattern 28-1B. If First National insists that Cliff sign the loan applica?tion, making himself personally liable for payment whether or not Beta defaults, Cliff will be
A) a guarantor and a surety.
B) a guarantor only.
C) a surety only.
D) neither a guarantor nor a surety.

Quizplus · Accepted Answer

If Cliff signs the loan application and becomes personally liable for the payment, he would be a surety. A surety is someone who guarantees to a lender that the borrower will repay the loan. If the borrower defaults, the surety will be responsible for taking care of the loan. A guarantor, on the other hand, is someone who gives a secondary guarantee of the borrower's promise to repay the loan.