insure a portion of a loan against a default. This gives commercial banks an incentive to lend money to private exporters or investors. Sovereign governments back these guarantees, and the government of the ECA that issued the guarantee assumes the liability in the case of default (see also 'Canada account'). Occasionally the ECA recovers its losses through the government that hosts the project or borrower. In this case, the loss becomes part of the official debt owed to the country that issued the guarantee, essentially transforming a private loan into a public debt. In exchange for the loan guarantee, companies provide ECAs with a guarantee fee, often a portion of their profits for a project.
A guarantor undertakes that he will repay a debt incurred by another person or company to a bank or other creditor and the bank or other creditor can require him to pay the outstanding amount if that person cannot or will not pay their indebtedness. Proprietors and directors of companies are often asked to give personal guarantees for their company's borrowings to provide additional security. A bank will commonly require the guarantee to be secured, for example a mortgage over a director's house. In the case of co-guarantors each guarantor will be fully liable for the outstanding amount - it is up to guarantors to resolve their respective obligations between themselves.