don t confuse a guarantor with a cosigner a cosigner s responsibility for a debt occurs at the same time as the original borrower while the guarantor s obligation only kicks in when the borrower defaults 
example of a financial guaranteehere s a hypothetical example to show how financial guarantees work let s assume that xyz company has a subsidiary named abc company abc company wants to build a new manufacturing facility and needs to borrow 20 million to proceed if banks determine that company abc has potential credit deficiencies they may ask xyz company to become a guarantor for the loan that means that if abc defaults xyz company must repay the loan using funds from other lines of business 