Stop requiring owners or their families to personally guarantee the debts of small companies
In short
- Banks and other lenders stop making the owner or the owner's family personally promise to repay a small company's loan.
- Lenders decide whether to lend based on the business itself, its expected sales, and what the company owns.
- If the company fails, the owner's home and living money can no longer be taken.
- In return, owners promise to keep company money and personal money clearly separate.
- Lenders take on the risk of not being repaid through interest rates and guarantee systems.
If this comes true
A man who closed his bakery in a harbor town paid off his debt with the bakery's machines and his savings, and now lives in the same house with his family while he thinks about his next job. But the interest rate the bank offered his daughter for the restaurant she wants to open was higher than it used to be.
Water so far 💧 0
The proposal in detail
The rule covers business loans to companies and sole proprietors that are below a certain size in number of workers or sales, and it applies not only to banks but also to moneylenders, leasing companies, and online loan brokers. Each society sets the size limit for a small company in numbers. For new loans, asking a third party who does not run the business, such as the owner's family or acquaintances, to act as guarantor is banned outright, and any such contract is void. A guarantee from the owner is also banned in principle, with one exception: a conditional guarantee that takes effect only if the owner breaks a promise, such as using company money for private purposes, falsifying the books, or hiding assets. Workarounds to the ban, such as making a spouse a joint borrower or making someone put up their home as collateral, are restricted in the same way. Existing guarantees are reviewed over a transition period, and lenders are required to remove them once it is confirmed that company money and personal money are kept separate. If a company still fails with a guarantee in place, the owner keeps a certain amount of the value of their home and enough money to live on for the time being, and the remaining guarantee debt is wiped out after a short period. For borrowers that are hard to lend to because they have no track record, such as newly founded companies, a public credit guarantee system funded by fees covers part of the losses.
BenefitsLife goes on after failure, making it easier to try again
If a company's failure no longer leads straight to a family's bankruptcy, it becomes much easier both for people to start a business and for people to close one early when things are not working. Closing early also keeps the losses passed on to trading partners and workers smaller. When an owner who failed once can go on to a second attempt with a clean slate, society also wastes less experience. Successors can take over a company without carrying a parent's guarantee, so fewer companies will be closed just because they are profitable but have no successor. Lenders change too. If they can no longer count on the owner's home, they have to sharpen their eye for business plans and cash flow, and money reaches promising businesses with little collateral more easily. This also helps narrow the gap in starting points between people who lack family property and people who have it. Also, because separating company money from personal money becomes a condition for borrowing, small companies' books get in order and owners can understand their own business's condition more easily. Risk goes back to the lenders, who can judge it and put a price on it, which is how the roles should have been divided all along.
DrawbacksSmall companies with no track record find loans harder to get and costlier
Lenders who lose the safety net of a guarantee will pull back from the borrowers who look the riskiest. The first to be hit are the newly founded small businesses with no track record and no collateral, the very ones this proposal is meant to help. Even if they can borrow, interest rates will rise, and some financial institutions will stop handling small loans because they are not worth the effort. If people shut out of regular lending turn to illegal lenders who charge outrageous interest, the result would be worse than today. There is also the problem that if owners know their own assets are safe even when they cannot repay, they may be more likely to take reckless gambles. Conditional guarantees are meant to prevent this, but proving private use of funds or falsified books takes strong accounting and courts, and in a society where these are weak, punishing broken promises is difficult, and in reality a personal guarantee is the only reliable brake lenders have. Furthermore, if public credit guarantees support borrowers who are hard to lend to, part of the losses will end up covered by taxes, and people unrelated to the business will pay for other people's failures. The criticism that removing guarantees does not eliminate risk but only shifts who pays for it must be answered head on.
Learn the background
When a small company borrows from a bank, it is taken for granted in many parts of the world that the owner will be asked to act as guarantor. When the company's assets are not enough, lenders rely on the owner's home and savings instead of examining the business prospects closely. As a result, when the company stumbles, the owner loses their own livelihood along with the company, the family can be forced out of their home, and they stay tied to debt for years. The company principle that a shareholder's responsibility ends with the money they put in works for large companies, but in effect it does not work for the owners of small ones. This heavy burden delays the time when a business should be closed. Owners fear that the guarantee will actually be called in, so they keep going at a loss and make the damage bigger. Successors also hate the idea of inheriting the guarantee along with their parents' company, and so even profitable companies are sometimes shut down. On top of that, young people, women, and newcomers to a country, who have no house to put up or wealthy relatives, find it harder to borrow even when they have good ideas. The current way of making the most vulnerable individuals bear the cost of failure should be changed.
Choose them ready to accept their drawbacks too (up to 5)
It helps pay for the server and the AI's planting
This proposal was written in Japanese by AI (claude-opus-5-5, policy version 2026-10-20a) and translated by AI (claude-sonnet-5-5). Nobody has checked the facts. Read the original (日本語) How the AI writes