Your bank considers the project sound — and still says no, because the collateral is not there. That gap is exactly where a guarantee bank (German: Bürgschaftsbank) steps in. It does not vouch for the business case; it vouches for the collateral your house bank is missing.
This guide explains what a guarantee bank is, how it works toward your house bank, when it actually helps, how the states and their association are organized, how the application runs, which documents matter, what a bond costs — and how it differs from KfW.
What is a guarantee bank?
A guarantee bank is a credit institution under German banking law (KWG) that supports commercial businesses and licensed professionals with debt or equity financing. It does not exist as a single, national body — each of Germany’s 16 federal states runs its own, independently, backed by regional chambers, associations and banks.
Legally, a guarantee bank issues a suretyship toward your house bank under Section 765 BGB (the German Civil Code): it undertakes toward the house bank, as creditor, to answer for your company’s obligation if you cannot repay the loan. The bank itself pays out nothing up front — similar to a bank guarantee, it lends its creditworthiness, not its capital.
How it works toward your house bank
For your house bank, a guarantee bank bond is additional security for exactly the portion of the loan it cannot cover with its own collateral. Instead of rejecting the loan outright, or granting a smaller amount, the house bank can carry risk backed by that additional guarantee that it would not carry alone.
For you as a business, little changes about the credit relationship itself: you still sign the loan agreement with your house bank, still pay interest and principal to it, and the house bank remains your sole point of contact for ongoing servicing. The guarantee bank only becomes visible if you can no longer service the loan — then it honors its commitment to the house bank and claims the amount back from you, as with any other suretyship.
LiquidityLens brings your financial status, bank mirror and 13-week forecast into one view — exactly the numbers your house bank forwards when it applies to a guarantee bank on your behalf.
See the Liquidity Control SprintWhen a guarantee bank actually helps
A guarantee bank substitutes for missing collateral, not for a missing business model. That distinction is the one many enquiries miss: the guarantee bank reviews the project independently and only issues the bond if it, like the house bank, is convinced the project is viable. If the only gap is tangible security — say, a startup with no banking history yet, or an investment larger than the assets on hand — a bond can close exactly that gap.
Typical situations are startups and business succession without sufficient collateral of their own, growth financing that exceeds the existing credit relationship with the house bank, and investment projects whose funding need exceeds the assets available. All three share the same standard: a guarantee bank does not review more leniently than a house bank — it reviews the same viability, only with the added result that it stands in when collateral is missing.
How guarantee banks are organized: states and the VDB
Every German federal state has its own guarantee bank as an independent credit institution — the one responsible for your case is always the guarantee bank in the state where your company is headquartered. They are backed by regional chambers, associations, banks and, in some cases, insurers — not by the federal government.
Their umbrella association is the Verband Deutscher Bürgschaftsbanken (VDB), the German association of guarantee banks. It counts 17 member guarantee banks and equity-guarantee companies, plus 15 regional equity-participation companies (Mittelständische Beteiligungsgesellschaften, MBGen). The MBGen complete the picture: while a guarantee bank issues a bond for debt financing, an MBG invests directly with equity or equity-like capital — for projects that need more equity, not more credit security.
The VDB does not publish a central maximum amount or guarantee ratio — both are set by each state guarantee bank in its own programmes and conditions. A reliable figure therefore only comes from the guarantee bank responsible for your company’s headquarters, not from any blanket statement about “the guarantee bank” as an institution.
How the application runs: always through your house bank
You never apply for a guarantee bank bond directly — the route always runs through your house bank. That is the fundamental difference from a bank guarantee, which you apply for directly with your own bank.
The process follows four steps: you submit your financing project to your house bank with the usual loan documents. The house bank reviews the project and your creditworthiness like any other loan application and establishes that it is short of collateral for the full amount. It then applies itself for a default guarantee at the guarantee bank responsible for your company’s headquarters and forwards the documents. The guarantee bank reviews the project independently a second time and decides on approval; once it commits, the house bank disburses the loan.
This indirect route means the conversation that decides the financing happens first with your house bank — not with the guarantee bank. How well you prepare that conversation decides whether an application ever reaches the guarantee bank at all.
The documents that decide approval
Because the guarantee bank reviews the project independently, the same documents your house bank already asks for carry the application a second time. The solid core:
| Document | What it shows |
|---|---|
| Financing or business plan | The project, funding need, viability |
| Current financial status | Liquidity, bank lines and utilisation today |
| 13-week cash flow forecast | Future debt service out of ongoing cash flow |
| Debt service capacity | Whether interest and principal on the new loan are affordable |
| Annual financial statements / management accounts | Earnings performance, especially above the KWG disclosure threshold |
| Overview of existing collateral | What the house bank already covers — and what is missing |
Two documents carry disproportionate weight. Debt service capacity shows whether the added loan is affordable out of ongoing cash flow — calculated as the debt service coverage ratio (available cash flow ÷ debt service), which you can check in advance with the debt service capacity calculator. And the overview of existing collateral is what actually makes the gap visible that the guarantee bank is meant to close — without it, even the right size of guarantee is hard to justify.
Above certain loan volumes, Section 18(1) sentence 1 KWG (the German Banking Act) requires the house bank to obtain disclosure of your financial position through annual financial statements anyway — regardless of whether a guarantee bank is involved.
What a guarantee bank bond costs
The usual cost structure has two parts: a one-time processing fee at application, covering the guarantee bank’s own review of the project, and an ongoing commission on the guaranteed amount for as long as the bond runs — economically comparable to guarantee commission on a bank guarantee.
The German association of guarantee banks does not publish specific rates centrally; they sit in each state guarantee bank’s own conditions and depend on the programme, the bond amount and the term. The only reliable figures are the conditions the responsible guarantee bank actually communicates in your case — not general rules of thumb from the internet.
Note: This article explains the general mechanism and does not replace financing advice. Which guarantee bank is responsible for your company, and which programmes, maximum amounts and conditions currently apply, should be confirmed with your house bank or directly with the guarantee bank responsible for your company’s headquarters.
How it differs: guarantee bank, KfW and bank guarantee
Three instruments are often confused in financing practice because all three respond to missing collateral or missing capital — but in different ways:
| Instrument | What it does | Contracting party |
|---|---|---|
| Guarantee bank | Default guarantee for missing collateral toward your house bank | Your house bank (you apply through it) |
| KfW | Refinances the loan, usually with an indemnity to the house bank | Your house bank (on-lending principle) |
| Bank guarantee | Your own bank’s guarantee toward a third party (e.g. a customer) | Your bank directly |
The difference from KfW: KfW is a state development bank that refinances loans and usually grants an indemnity to the on-lending house bank — but it does not itself issue a guarantee toward a third party like a customer or landlord. The difference from a bank guarantee: with a bank guarantee, your own house bank vouches for you toward a third party; with a guarantee bank, a third institution vouches toward your house bank to reduce its credit risk. In practice, a guarantee bank bond and KfW financing can also be combined in the same project when both collateral and low-cost refinancing are missing.
For your planning: keep an eye on debt service and headroom
A guarantee bank bond does not solve a structural liquidity problem — it unlocks financing that would otherwise have failed for lack of collateral. The new debt service from interest and principal stays real afterward and belongs in the same forecast as any other loan.
Two points matter in particular. First, the guarantee bank’s commission runs for as long as the bond exists — just like a bank guarantee, it is an ongoing cost that should be factored into debt service capacity, not just the loan’s own interest and principal. Second, only a 13-week cash flow forecast shows whether the added debt service is actually affordable out of ongoing cash flow before the first instalment falls due — not only after.
LiquidityLens keeps your financial status, bank mirror and 13-week forecast on the same data — the basis for the conversation with your house bank that, if collateral is missing, is what turns into an application to a guarantee bank in the first place.
Weekly grid, cash in/out, low-point alert — ready to use.
FAQ
The most common questions about guarantee banks, answered below.