- A bank guarantee is a binding commitment undertaken by the bank on behalf of the client (the applicant) in order to secure the client's contractual obligations towards its business partner (the beneficiary) up to the amount fixed in the bank guarantee, provided a complying demand is presented.
- A bank guarantee is a type of collateral that can be used in managing various kinds of risk. Guarantees are classified by the kind of risk they cover. Read more about different types of guarantee.
- A bank guarantee is considered to be equivalent to credit facility and can only be issued upon relevant credit decision approval.
A payment guarantee is a type of guarantee that provides you as the seller indemnity in case your buyer fails to meet its payment obligations by due date.
- A payment guarantee mitigates the buyer’s payment risk for you as the seller.
- The amount covered by a payment guarantee is normally the value of the goods or the transaction.
- The term of a payment guarantee is calculated as:
payment date + number of days given for submission of claim = expiry date of guarantee.
An advance payment guarantee covers the amount paid by the buyer in advance to the seller which should be refundable should the seller not deliver the goods or services purchased or deliver less than agreed or otherwise breache the contract after receiving the advance payment.
- The amount covered by an advance payment guarantee is normally the amount paid in advance.
- The expiry date is the date when the goods or services should be delivered or a certain number of days after this date.
- An advance payment guarantee normally also has a clause stating that the guarantee will not come into effect until the advance payment has been received by the seller on its account.
A tender guarantee covers the party running the tender if a tender participant changes the conditions of their bid, cancels their bid during the validity of their bid or refuses to sign a procurement contract after winning the tender or refuses to provide any additional guarantees.
- The value of a tender guarantee is fixed in the tender conditions and is normally 2–5% of the value of the procurement contract.
- Tender guarantees are normally issued for a short period.
A performance guarantee covers payment to one party of a contract if the counterparty fails to fulfil their side of the contract by not delivering goods or by not performing the agreed works etc.
- The amount covered by a performance guarantee is normally 5–10% of the value of the contract.
- The expiry date of a guarantee is the date that the obligation is supposed to be done under the contract.
A warranty guarantee covers the beneficiary of the guarantee in case they discover defects in the goods delivered to them or in the construction work done for them or anything similar during the warranty period.
- The value of the guarantee is set by agreement.
- The date of expiry depends on the business of the parties and on what the warranty covers.
A customs guarantee covers the Tax and Customs Board if customs duties are not paid.
You must pay a guarantee provision during the term of a bank guarantee. This is normally calculated as an annual percentage of the amount guaranteed. The size of a guarantee provision depends on your particular circumstances such as your estimated risk level, your financial status or the value of the collateral.
|Issuing a guarantee||77 €|
|Sending a letter of guarantee, a claim for payment or another SWIFT message at a customer's request||10 €|
|Provision (risk premium)||As agreed|
|Additional fee for issuing a guarantee with the wording or under the conditions requested by the client||65 €|
|Processing a request for a guarantee payment||100 €|
|Changing an issued guarantee||77 €|
|Changing the collateral of a guarantee||32 €|
|Informing the addressee of receipt of a SWIFT message containing a letter of guarantee or changing a guarantee||65 €|
|Drafting or amending a sample letter of guarantee||65 €|