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Bank Guarantee

types of bank guarantee, how to get bank guarantee, bank guarantee charges, performance bank guarantee, bank guarantee providers, bg/sblc providers no upfront fees, lease bg sblc, international bank guarantee providers, provider of leased bank guarantee

23 Jun Bank Guarantee

Posted at 18:04h in Bank Guurantee (BG) by
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Bank Guarantee Overview-  Types of Bank Guarantee, Advantages of Bank Guarantee, How to get Bank Guarantee

A bank guarantee is an assurance that a bank provides to a contract between two external parties, a buyer and a seller, or in relation to the guarantee, an applicant and a beneficiary. The bank guarantee serves as a risk management tool for the beneficiary, as the bank assumes liability for completion of the contract should the buyer default on their debt or obligation.

types of bank guarantee, how to get bank guarantee, bank guarantee charges, performance bank guarantee, bank guarantee providers, bg/sblc providers no upfront fees, lease bg sblc, international bank guarantee providers, provider of leased bank guarantee

A bank guarantee is a contract between 3 different parties and they include:

  • The applicant (the party that requests a bank guarantee from the bank and borrows from a creditor)
  • The beneficiary (the party that receives a partial guarantee)
  • The bank (the party that agrees to sign and assures payment in case the applicant fails to repay the loan)

Bank guarantees are very commonly utilised among business entities. With the help of a bank guarantee, the debtor or borrower or customer will be able to purchase equipment, machinery, raw materials, acquire additional funds, etc. for commercial purposes. Bank guarantees help businesses as creditors will get a proper reassurance that the loan amount will be repaid by the bank if the business is unable to repay the loan entirely on time.

When a bank signs a bank guarantee, it promises to pay any amount according to the request made by the borrower. Hence, signing a bank guarantee implies a high risk for banks.

Types of Bank Guarantee

  • Deferred payment guarantee: This refers to a bank guarantee or a payment guarantee that is offered to the exporter for a deferred period or for a certain time period. When a buyer purchases capital goods or machinery, the seller will give credit to the buyer when the buyer’s bank gives a guarantee that it will pay the unsettled dues of the buyer to the seller. Under this type of guarantee, payment will be made in installments by the bank for failure in supplying raw materials, machinery or equipment.
  • Financial guarantee: A financial bank guarantee assures that money will be repaid if the party does not complete a particular project or operation entirely. According to the financial guarantee agreement, when there is a delay in the completion of the project, the bank will make the payment.
  • Advance payment guarantee: Under this kind of guarantee, an advance payment will be made to the seller. There will also be a guarantee that if the seller fails to deliver the service or product accurately or promptly, the buyer will receive a refund of the payment.
  • Foreign bank guarantee: A foreign bank guarantee is provided by a bank on behalf of a borrower. This will be offered on behalf of the foreign beneficiary or creditor.
  • Performance guarantee: Under a performance guarantee, compensation of money will be made by the bank when there is any delay in delivering the performance or operation. Payment will have to be made even if the service is delivered inadequately.
  • Bid bond guarantee: Under this type of guarantee, there will be a supply bidding procedure. This will be conducted by the contractor for the owner of an infrastructure or industrial project or any kind of operation. The contractor of the project will guarantee that the best bidder or the highest bidder will have the capability and authority to implement a project as per his or her preferences. The bid bond will be given to the owner of the project as a proof of guarantee and the bond will imply that the project will have to be devised according to the bid contract.

Features of a Valid Bank Guarantee

  • The period until which the guarantee holds is clearly specified
  • The guarantee issuance is always for a specific amount
  • The purpose of the guarantee is clearly stated
  • The guarantee is valid for a specifically defined period
  • The grace period allowed to enforce guarantee rights is also stated in the guarantee
  • Guarantee clearly states the events under which it can be enforced

It is important that guarantee can be enforced based on terms of the contract (i.e. guarantee agreement) existing between the bank and the beneficiary. Generally, beneficiaries do state a clause to be included for charging penal interest in the case of delayed payment. Hence, it is essential for the bank to be cautious while finalizing the format and text of the contract (the guarantee agreement). While signing the same, the provision of penal interest and clauses attached to delays and default are to be carefully noted.

HSBC bank guarantee provider- Grand City Investment Limited

bank guarantee provider- Grand City Investment Limited

Advantages of Bank Guarantees

To the applicant:

  • Small companies can secure loans or conduct business that would otherwise not be possible due to the potential riskiness of the contract for their counterparty. It encourages business growth and entrepreneurial activity.
  • The banks charge low fees for bank guarantees, normally a fraction of 1% of the overall transaction, for the assurance provided.

To the beneficiary:

  • The beneficiary can enter the contract knowing due diligence’s been done on their counterparty.
  • The bank guarantee adds creditworthiness to both the applicant and the contract.
  • There is a risk reduction due to the bank’s assurance that they will cover the liabilities should the applicant default.
  • There is an increase in confidence in the transaction as a whole.

Disadvantages of Bank Guarantees

  • The involvement of a bank in the transaction can bog down the process and add an unnecessary layer of complexity and bureaucracy.
  • When it comes to particularly risky or high-value transactions, the bank itself may require assurance on the part of the applicant in the form of collateral.

Why is Bank Guarantee Important?

Adds to Creditworthiness

BGs reflect the confidence of the bank in your business and indirectly certify the soundness of your business.

Assessment of Business

In the case of foreign transactions or transactions with Government organizations, the foreign party or a Government Undertaking is constrained and cannot assess the soundness of each and every applicant to a project. In such cases, BGs act as a trusted instrument to assess stability and creditworthiness of companies applying for projects.

The Confidence of Performance

When new parties associate in the business and are skeptic about the performance of the company undertaking the project, performance guarantees help in reducing the risk of the beneficiary.

Risk Reduction

Advance payment guarantees act as a protection cover wherein the buyer can recover the advance amount paid to the seller if a seller fails to deliver the goods or services. This protects against any probable loss that a party can suffer from a new seller.

Bank Guarantee vs. Letter of Credit: What’s the Difference?

Difference between Letter of Credit and Bank Guarantee- Grand City Investment Limited

Bank Guarantee vs. Letter of Credit- Grand City Investment Limited

 

Many times, people get confused between bank guarantee and a letter of credit. However, one should understand that both are pretty different.

A bank guarantee and a letter of credit are both promises from a financial institution that a borrower will be able to repay a debt to another party, no matter what the debtor’s financial circumstances. While different, both bank guarantees and letters of credit assure the third party that if the borrowing party can’t repay what it owes, the financial institution will step in on behalf of the borrower.

A bank guarantee refers to a commercial or financial instrument that is provided by a bank, where the bank assures or guarantees a beneficiary that it will make the payment to the bank in case the actual customer fails to meet his or her obligations. The bank will pay on behalf of the customer who requests for a bank guarantee.

On the other hand, a letter of credit refers to a promise or commitment in writing made by a bank or any other financial institution or corporation to a particular seller that payment will be made to the seller if the seller completes performing whatever is mentioned in the letter of credit. For the bank to make the payment on behalf of the original buyer, there should be a documentary proof that the seller has completed the transaction accurately by delivering the right product or service on time. The seller will get a guarantee from the bank that the seller will definitely pay the amount on behalf of the original buyer once the obligations are fulfilled.

Bank Guarantee Process- How To Get A Bank Guarantee (BG)
GRAND CITY INVESTMENT LIMITED is a provider of bank guarantee at 4% leasing fee per year. We are also direct providers of business loans, international project funding, Standby Letter of Credit (SBLC), Letter of Credit (LC/DLC), BG, SBLC, Lease BG etc.

Our bank instruments are cash backed and can be used for Discounting, Monetization and Private Placement Programs (PPP). They also can be used as collateral against a loan or credit line to secure Funding for Projects, as well as import and export transactions because many importers and exporters are always in need of bg bank guarantee as well as contractors, export finance, international trade finance etc.

Bank Instrument Description:
1. Bank Instrument Type: Cash Backed Bank Guarantee {BG}
2. Face Value: USD 1 Million (Minimum) to USD 5 Billion (Maximum)
3. Issuing Bank: Barclays Bank London, HSBC Hong Kong, Citibank New York, Deutsch Bank Germany or any prime bank.
4. Age: One Year and One Day (with rolls and extensions where applicable)
5. Leasing Price: 4% of Face Value plus 2% brokers commission (Applicable only if there are brokers in the transaction)
6. Delivery: SWIFT MT-760
7. Payment: MT103 Swift Wire Transfer
8. Hard Copy: Bank Bonded Courier within 7 banking days.

These are the reasons why you should Work With Us:

At Grand City Investment Limited we value your time and get straight to the point. Some companies will talk your ear off, we believe that action speaks louder than words so we prefer to be solely focused on results. We have a large network of world class banks which gives us the unique ability to create outcomes others can’t. We have been in the loan and financial instrument industry since 37 years ago.

When it comes to issuance, leasing, funding and monetization of any bank instrument such as bank guarantee, standby letter of credit, bg sblc, getting to the finish line is all that counts and that’s what we excel in at Grand City Investment Limited. We have been successfully closing deals for over 37 years, show us another company in this industry that can match our record?

What drives us: We have a passion to help emerging and growing companies succeed and help investors realize their goals. So we are Driven by Passion and Integrity

Below are a few of the things that make us unique and different from other companies.

1. We are a Government of Hong Kong Licensed Money Lender that Is Legally Registered in Hong Kong since May 29, 1984, that is 37 years of successful service and excellence.
2. we issue bg, dlc and sblc from world class banks such as Barclays bank London, hsbc Hong Kong, Citi Bank, Credit Suisse, Standard Chartered Bank, Deutsche Bank or any prime bank of choice.
3. We issue bg sblc in both usd or Euro Currencies, if you pay in usd we Issue in usd & if you Pay in Euro, we issue in Euro.
4. Your Privacy is our Priority, we do not share your data or Business Transactions with third parties.
5. Since 1984 till date No Customer has ever had a failed transaction with us. We have 99% success rate.
6. Brokers Always Welcomed & Protected against possible circumvention.
7. We have solutions for every customer in every industry.
8. We are Efficient, Consistent, Transparent & Reliable
9. We are straight to the point 
10. Experienced and qualified staff
11. Extremely Satisfied Clients

12. No prepayment penalty
13. Fast Approvals Closing

14. No Hidden Fees or charges
 
Therefore, if you are looking for Lease or Rent Bank Guarantees, bg, dlc sblc, L/C or loans and project funding then you have come to the right place. Kindly contact us today for all your financial needs.
NOTICE TO BROKERS/AGENTS/COMPANY REPS:  We value and appreciate brokers who are direct to their clients. New brokers are welcomed and compensated with between 1% to 2% commission on every deal. Here are a few of the many benefits of being a Grand City Investment broker:

 

 

Grand City Investment Limited broker

bank Instrument provider- Grand City Investment Limited

  • Professional Support for brokers
  • Earn between 1% to 2% Commission on Every Deal
  • No Broker Chains, So please Be Direct to your clients
  • Brokers are 100% Protected Against Possible Circumvention.
  • Wide Range of Financial Instruments to choose from such as bg sblc issuance & Monetization Programs.
 

 

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