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One of the most pressing issues facing developing economies is how to provide expansion capital for existing businesses. However, this issue is more pressing in China, where private enterprises suffer significant financial constraints from capital market limitations. Therefore, the significance of obtaining third-party loan guarantees rises among private firms in the secondary loan market. This study investigates the relationship between loan guarantees and the firm’s cost of debt and the moderating effect of management earnings forecasts. We find that loan guarantees have a significant negative relationship with the firm’s cost of debt. However, a positive relationship between information asymmetry measures and loan guarantees is more pronounced, suggesting that loan guarantees reduce the significance of information asymmetry issues, which impair borrowing firms’ re-payment ability and increase the credit risk …