Types of Bank Guarantees and Its Definition
What Are Bank Guarantees? A BG MT760 is an assurance between the buyer and the seller. This assures that if the buyer fails to oblige the payment terms; then they need to make the payments on their behalf. There are different types of Bank Guarantees available for traders and contractors.
Guarantee Letters are used in bulk trade dealings such as – purchasing equipment, heavy machinery, raw materials or to get funds to run businesses and so on. Further, to facilitate all these deals, the Banks act as a guarantor that the payment will be made on time; and if not, they will oblige to pay on behalf of their client.
When traders from overseas do trade with each other, both buyers and sellers look for some kind of assurance that holds the transaction together. And this trust is easier to maintain if a third party is willing to guarantee the other parties’ liability. Usually, sectors are ready to offer different types of Bank Guarantees for traders to facilitate global trade deals.
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Types of Bank Guarantees
Performance Bank Guarantee
Performance Bond is a written commitment issued on behalf of contractors; to assure the positive completion of the project or the supply of goods or projects. Under this Letter of Guarantee, the banks will give the assurance and pay the compensation, if the goods and services are not delivered on time, as promised in the agreed contract.
Bid Bond Guarantee
Mainly used in construction, Bid Bond helps contractors to win the bidding contest by giving assurance that they will complete the project as quoted in the bid. Since this gives the needed assurance to project owners. This is the reason why nowadays, contractors provide Bid Bond while submitting their bids for the tender. By doing so, it increases their chance of winning the bid. Also, allows them to secure contracts. In the same way, the seller can also avail this bond to ensure that they will supply the goods; as per the quoted price, if they won the bid.
Advance Bank Guarantee
Advance Payment Bond issued on behalf of its client, upon request, when the seller requires advance payment from the buyer. If the seller defaults to supply the goods or fails to perform the tasks mentioned in the contract; then the buyer has the right to call the bond; to claim the full or partial payment made to the seller.
Payment Guarantee
Deferred Payment Guarantee acts as an assurance for payment usually made in installments, i.e. overdue or delayed. This type of bond issued for the purchase of heavy machinery and bulk goods.
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How to Get Types of Bank Guarantees On Your Behalf?
Getting a Guarantee Letter on your behalf is not an easy task. Before issuing MT760, usually, banks will undergo a study; to verify whether their clients are eligible to avail MT760 or not.
To issue MT760 on your behalf, they may have certain criteria. Also, it includes a certain percent of the project value as cash margin or third party assurance. If you didn’t fall under these terms; then the bank will decline your request.
So, to help you to secure contracts and worthy deals, Bronze Wing Trading L.L.C., the Bank Guarantee Provider in Dubai assists traders and contractors to avail BG MT760 without blocking cash funds.
So, why are you waiting for? Send your BG request to us. We will study your request & will get back to you with a FREE Quote in 24hrs. To issue the BG MT760 on behalf of your company at ZERO Collateral, we will extend our credit lines & will block our own cash funds on behalf of your company & get the BG issued in 2 days.
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