Letters of Guarantee
Bank Guarantee is a bank's commitment to a counterparty entering into a contractual relationship with another counterparty. The Bank commits itself to repay any amounts agreed upon in case of non-fulfilment of the agreed obligations, subject of presentation of a written complying demand by the beneficiary within the defined time and in line to the terms and conditions of the issued guarantee. Relationships may be trade, so the subject of the guarantee may be the purchase of the goods and the guarantee is issued to ensure that the payment is made as agreed between the parties or may be the provision of a service where the guarantee ensures that the service will be performed as agreed by the parties, etc.
Types of guarantees:
Depending on the relationship between the two parties, the Applicant and the Beneficiary, warranties may be of these types:
- Guarantee for “Bid Bond” / “Bid Security”
- Guarantee for payment of “Payment Guarantee”
- Performance Guarantee “Performance Bond”
- Advance Guarantee “Advance Payment Bond”
- Other Bank Guarantees that can be tailor made specifically in line to the relationship it is subject to.
- The client pays a commission for issuing a Letter of Guarantee, in line to the banks terms and conditions.
- A Letter of Guarantee can be issued against customer’s own funds or through a credit limit secured by real estate collateral of other acceptable securities.