Types of Bank Guarantees and Its Definition
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.
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 will make the payments on their behalf.
BG MT760 is used in bulk trade dealings such as – purchasing equipment, heavy machinery, raw materials or to get funds to run businesses and so on. To facilitate all these deals, the Banks acts as a guarantor that the payment will be made on time; and if not, they will oblige to pay on behalf of their client.
Types of Bank Guarantees
Performance Bond
Performance Bond is a written commitment issued on behalf of seller / contractors; to assure the positive completion of the project or the supply of goods / tasks. Under this bond, 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
Bid Bond / Tender Bond mainly used in construction. This 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. Nowadays, contractors obliged to provide Bid Bond; while submitting their bids for the tender. By doing so, it increases their chance of winning the bid; and allows them to secure lucrative 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 Payment Bond
Advance Payment Bond issued on behalf of its client, upon request. And this issued 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.
Deferred Payment Guarantee
Deferred Payment Guarantee acts as an assurance for payment usually made in installments, i.e. overdue or delayed. This type of guarantee issued for the purchase of heavy machinery and bulk goods.
How to Get Types of Bank Guarantees On Your Behalf?
Getting a BG MT760 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 the 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 your request will be declined.
So, to help you to secure lucrative contracts and worthy deals, Bronze Wing Trading L.L.C., the international bank guarantee providers in Dubai assist traders and contractors to avail BG MT760 without blocking cash funds.
Open Up New Business Opportunities with Bank Guarantees!
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