Bank guarantees are written irrevocable undertakings issued by the Bank to pay the beneficiary a specific sum of money on demand in the event that its customer/applicant has not fulfilled his/her contractual obligation within the validity of the guarantee.
The Bank guarantees Bid security/Bid bonds, performance guarantees, advance payment guarantee, retention guarantees, shipping guarantees and customs bonds.
ABC Capital bank as a lending institution ensures to cover a debt in case a debtor fails to or lets a company buy what it otherwise could not, helping business growth and promoting entrepreneurial activity.
Types of Bank Guarantees
There are different kinds of bank guarantees, including direct and indirect guarantees. Banks typically use direct guarantees in foreign or domestic business, issued directly to the beneficiary.
Individuals often choose direct guarantees for international and cross-border transactions, which can be more easily adapted to foreign legal systems and practices since they don’t have form requirements.
Indirect guarantees occur most often in the export business, especially when government agencies or public entities are the beneficiaries of the guarantee. Many countries do not accept foreign banks and guarantors because of legal issues or other form requirements. With an indirect guarantee, one uses a second bank, typically a foreign bank with a head office in the beneficiary’s country of domicile.
ABC Capital Bank – Full Requirements for Bank Guarentees