Bank Guarantees
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Bank Guarantees

Bank Guarantees

What is Required for Trade Finance

If you do not trust your partner, are unsure of their solvency or fulfillment of contractual obligations, require a payment deferment or advance payment – we offer you to issue a bank guarantee:

Tender Guarantee

Issued at the request of a bidder to the party announcing the tender, ensuring the bidder fulfills its obligations arising from its tender proposal.

Performance Bond

Issued at the request of a contractor of goods or services to the customer, as a security for the proper performance by the contractor of the terms of the contract concluded between the contractor and the customer.

Advance Payment Guarantee

Issued at the request of the seller of goods or services to the buyer, usually in the amount of the advance received under the contract concluded between the seller and the buyer, and ensures the return of the amount paid in advance.

Payment Guarantee

Issued at the request of the buyer in favor of the seller and ensures that the buyer fulfills their payment obligations for the supplied goods/services, in accordance with the contract concluded between the seller and the buyer.

Loan Repayment Guarantee

Issued at the request of the borrower by the organization that provided the loan, and ensures the borrower's fulfillment of obligations to the lender for the repayment of the principal amount and/or interest on the loan within the agreed deadlines.

Standby Letter of Credit

Like a guarantee, it serves as a security for the obligation of payment or performance of other contractual obligations. Standby letters of credit are used to finance international trade with countries where the use of bank guarantees in commercial transactions is prohibited (USA), where the documentary nature of guarantees is prohibited, or in transactions with international organizations (European Bank for Reconstruction and Development, World Bank, etc.). Unlike guarantees (which are usually subject to the law of the issuing country), standby letters of credit are governed by the Uniform Customs and Practice for Documentary Credits (ICC Publication No. 600) – an international document that is mandatory for execution.

Benefits for the Seller

  1. a guarantee is provided for the proper fulfillment of contractual obligations by the buyer as described in the terms of the contract
  2. the opportunity to receive an advance payment for goods or services
  3. expand the circle of counterparties

Advantages for the Buyer

  1. increase in amount and extension of payment deferral period for the purchased products

  2. obtaining payment deferral under the contract

  3. receiving high profits from alternative use of funds

  4. effective management of your financial resources

Requirements for Guarantee Issuance

  1. 100% monetary coverage or collateral (real estate, movable property, equipment, money in a savings account)

  2. Copy or draft of tender documentation, trade contract

  3. Original application for guarantee issuance

Scheme of Securing Contractual Obligations Using Guarantees

tf_scheme_1

  1. Contract/Agreement providing for the obligation to be secured by a bank guarantee;
  2. Application by the Principal requesting the issuance of a bank guarantee;
  3. Issuance of a direct bank guarantee by the Principal's bank in favor of the Beneficiary; If the Beneficiary requires confirmation of the guarantee from its (or a third party's) bank, the Principal's bank arranges for the issuance of a counter-guarantee (confirmation):
  4. Request by the Principal's bank to the Beneficiary's bank to issue a Bank guarantee in favor of the Beneficiary under the counter-guarantee of the Principal's bank;
  5. Issuance of the guarantee in favor of the Beneficiary.