A guarantee from another party may be used to support the borrower’s credit. A lender placing reliance on a guarantee or guarantees would need to evaluate the guarantor(s) in a similar way to that in which it evaluates the original borrower. For the lender to take a guarantee into account in setting or adjusting the terms and conditions of a loan, it would need to be reasonably satisfied that the guarantor(s) would be able to meet any shortfall resulting from the borrower being unable to meet its obligations in full in the event of a default. Guarantees are discussed in more detail in Section D.
TPG2020 Chapter X paragraph 10.87
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By OECD
Category: OECD Transfer Pricing Guidelines (2017) | Tag: Financial transactions, Guarantee, Intra-group loan, Loan, Treasury functions
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