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A bank guarantee is a one-way contract between a bank as the guarantor and a beneficiary as the party to whom a guarantee is made. A bank guarantee is a guarantee made by a bank on behalf of a customer (usually an established corporate customer) should it fail to deliver the payment, essentially making the bank a co-signer for one of its customer's purchases.for more information visit:-http://www.numerouno.net.in/bank_guarantee.html
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Bank Guarantee When running a business, you might come across a situation that your client may ask you to provide a financial guarantee from a third party. In such circumstances, approach your bank and ask it to stand as a guarantor on your behalf. This concept is known as bank guarantee (BG).
A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it.
When strangers do business with each other, trust is the glue that holds the transaction together. When parties to a transaction are located in different countries, the concern arises that an aggrieved party might not be able to enforce its legal rights. In such transactions, trust is easier to maintain if a third party is willing to guarantee protection of the parties' potential liabilities. Banks offer financial guarantees through bank guarantee that help finance international trade transactions.
Types of Bank Guarantee
Direct Guarantee
Indirect Guarantee
Advance Payment Guarantee
Performance Guarantee (Performance bond)
Payment Guarantee
Conditional Payment Guarantee
Guarantee Securing a Credit Line
Order & Counter Guarantee
Bank Guarantee
Direct Guarantee
Indirect Guarantee
Advance Payment GuaranteePerformance GuaranteePayment Guarantee
Conditional Payment GuaranteeCredit line GuaranteeOrder & counter Guarantee
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Direct Guarantee & Indirect Guarantee
A Direct Guarantee where the account holder instructs his bank to issue a Guarantee directly in favor of the Beneficiary.
An Indirect Guarantee where a second bank is requested to issue a Guarantee in return for a counter-Guarantee. In this case the Issuing Bank will indemnify losses made by this second bank in the event of claim against the Guarantee
Advance Payment Guarantee
An advance payment bond ensures repayment to the importer of any advance payments they have made (usually an agreed percentage of the contract amount (typically 10%-30%) if the exporter does not fulfill its contractual obligations.) This enables the employer to get a refund of advance payments made in the event of default by the contractor. It is issued for the full amount of the advance payment, but may contain reduction clauses, which enable a reduction in the maximum amount upon evidence of progressive performance.
Performance GuaranteeA performance bond safeguards the importer should the exporter fail to meet its contractual obligations. Performance bonds are usually issued for 10% to 20% of the contract amount but may be fixed by the local law of the importer's country. Performance Guarantee Normally issued for an amount equal to between 5 and 10 percent of the contact value, this guarantee assures payment to the employer in the event that the contractor fails to fulfil contract obligations.
Payment Guarantee
A payment guarantee ensures payment to the exporter if the importer does not fulfill its payment obligations.A payment guarantee can be issued in the form of an endorsement on a draft, also known as an “aval”.
Conditional Payment GuaranteeA conditional bank guarantee can be where the issuing bank is only liable upon proof of a breach of the contract by the builder, and where the proprietor sustains a loss as a result of the breach.2 In this situation, the issuing bank's liability only arises following a default by the builder under the contract.
Credit Line Guarantee
If you intend to monetize or credit line a Bank Guarantee that you have received (or due to receive), it is important to ensure that the Guarantee contains no onerous conditions and that it is worded specifically for monetizing. Draft Bank Guarantee wordings specifically used for securing credit lines. These draft documents are accepted by mainstream banks for monetizing.
For More Information Visit Here :
NumeroUno Bank GuaranteeCorporate Office:No. 109/1B, Varun Arcade, 1st Floor, Nr. Laukim Industries, Opp. R-Mall, Ghodbunder Road, Thane (W) 400 610 Maharashtra, INDIA
Call Us: +91 22 2589 2955Email: [email protected]:-
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