The credit department may try to strengthen its odds of collecting a receivable by requiring a personal guarantee by a principal of the customer. However, the guarantor may sometimes claim that his signature on the promissory document was forged, and so is able to avoid any liability. The credit manager may choose to contest this defense, but the process of comparing the “forged” signature to other documents verifiably signed by the guarantor can be expensive.
To avoid this problem, always require that the signature of the guarantor be witnessed by a notary public, and reject any such signatures for which a notary stamp has not been provided. An alternative is to have the company’s sales representative witness the signature in the same manner used by a notary public (i.e., verifying the identification of the signer with a driver’s license or some similar document that includes photo identification).
Also, include in the guarantee agreement a requirement that any revocation notice by the guarantor be sent by certified mail to the credit manager, so the guarantor cannot claim that he cancelled the agreement by notifying some other company employee. These steps reduce the risk that a guarantor can wriggle out of any payment obligations to the company.