Apr 20, 2020
Today we talk with Eamon Anderson, director of strategy and
underwriting at TheGuarantors agency, about an alternative security
deposit solution for commercial businesses that helps both the
landlord and the tenant. Their solution is basically an insurance
version of the commercial security deposit that protects the tenant
and landlord for the term of the lease from potential loss of rent
payments.
From a landlord's perspective, it's as good if not better than
the incumbent's solutions to cover the risk of missed rent or high
upfront tenant improvement (TI) cost. They're getting a surety bond
that works just like a letter of credit and it's backed by
investment grade credit, payable on-demand. And from any of the
landlord's lender's perspective, it works just like a letter of
credit.
From a tenant's perspective it's a lot cheaper option because
it's unsecured. All tenants have to do is pay an annual insurance
premium, typically an average of 5% of the security deposit per
year, and they never have to put up the full amount of the deposit
in cash. The tenant can then reinvest the money they're not giving
to the landlord.