Eli5: How an individual take a loan to buy a company, and have the purchased company responsible for paying back the interest?

Question

Can the company also be made responsible to pay back the loan itself, as well as the interest?

In: 19

Answer 1

I assume you’re talking about twitter but the same holds true for any business. The individual isn’t taking out a loan. They create a new business entity. Let’s call it New Twitter Inc. New Twitter Inc needs money to buy Twitter. Say $45B. Elon Musk is the owner of New Twitter Inc and he needs money. Bank loans New Twitter Inc $45B to buy Twitter. The loan is in New Twitter Inc name. Elon Musk then gives a personal guarantee that New Twitter Inc will pay that loan back. If they default then Elon will have to pay the bank with money from his stock in Tesla.