The scary truth about sureties
Guest blog post today, by our fantastic accountant, Robin Botha.
When entering into a loan agreement with your bank, it is common practice for them to insist that you sign a Surety. This may seem like just a normal admin requirement and most people will gladly sign it.
But beware – Sureties can be extremely dangerous for your financial health!
The main danger with a Surety is that it is often an “Unlimited Surety” which doesn’t expire. It remains in effect and can be resurrected many years after you have signed it, even if you no longer have any ownership of the asset. This is particularly scary, as you could end up covering the shortfall when a future owner of your ex-asset defaults.
Be cautious with Sureties and always follow these 4 steps to protect yourself:
- Avoid signing a Surety, if at all possible.
- Carefully check all the terms and conditions and possibly get a legal opinion before signing. Sureties can be limited by value and time periods and do not need to be open ended.
- Keep a detailed register of all Sureties you have signed.
- Retrieve all Surety documents that have reached their expiry date and ensure they are cancelled.
It is easy for entrepreneurs to make costly tax, accounting and payroll mistakes, so you are always welcome to reach out to me with any questions you may have.
Robin Botha CA (SA)
T 0861111031 | M 0828063872