How does a buyback guarantee work on loan marketplaces, and when can it fail?

A buyback guarantee is a promise by the lending company (the loan originator) to buy a loan back if the borrower is late beyond a set number of days, for example more than 60 days. A parent company sometimes guarantees the originator's obligation as well.
The key point: the guarantee is only as strong as the company that gives it. If the originator, or its guarantor, runs into financial trouble and cannot meet its buyback obligations, investors can suffer significant losses.
That is why experienced investors look past the guarantee to the originator itself: its financial statements, profitability, liquidity, how much debt it carries relative to its equity, and the share of its loans that are non-performing (more than 90 days overdue or in default). Capital is at risk: crowdfunding investments are not covered by deposit guarantee schemes, can lose part or all of their value, and may be hard to sell before the end of their term.