Guarantees are issued as assurance of payment or performance. It falls under the category Lending as similar requirements apply.
Benefits
- Avoid advance payments
- Enhance your reputation
- Qualify for bidding on large projects
Types of Guarantees
Letters of Intent (LOI) for Bank Guarantees
An LOI is the precursor to a Guarantee or Bond and is usually requested in the early stages of bidding. Once a bid has been won, the Bank Guarantee must be issued.Purposes: Long lease property acquisition – construction or other bidding.
Bank guarantees can be in various formats usually defined by your counter party, and can bear different titles depending on the purpose.
Bank Guarantees
To guarantee payment to the Tax Authorities or in case of other litigation, to avoid or lift embargoes in connection with tax and legal claims, also to obtain long lease land, to guarantee a minimum usage of power to a utility company, etc.
Performance Bonds
To guarantee compliance with a construction contract
Bid Bonds or Tender Guarantees
To guarantee seriousness and compliance with obligations in connection with large construction projects or large product or service delivery contracts
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Right if you want
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What you need to apply
- To confirm your capability to meet your contractual obligations to a third party
- To avoid down payments or advance payments
- To qualify for recurring bidding on large projects
Once a letter of intent to provide any of the above types of guarantees or a bank guarantee has been directly issued, the bank has committed itself to pay out in case of a claim from the beneficiary. As such it is considered a credit instrument and the same requirements apply as with loans and overdraft facilities.
Your Account Manager will explain what documents to submit in your specific case.
Please see below a checklist of the most common documents:
- Bank references certifying good credit standing and reputation
- Recent financial statements
- Cash flow projections per project phase
- An investment budget
- Fair own contribution to equity
- Copy of construction offers
- Appraisal reports of real estate properties to be provided as collateral
- A valuation report of furniture, fixture, equipment, machines or vehicles to be provided as collateral
- A recent list of stock
- A recent list of accounts receivable
- Other as per checklist under tab ‘General”*
*depending on which is applicable in your specific case.