A bank guarantee is a financial instrument issued by bank A to bank B, which guarantees its customers in their daily transactions.
A bank guarantee is a message sent between banks concerning the conditions of a transaction and the terms of sale, delivery, and payment, but it can also be used to insure a rent, an outstanding, a bank overdraft, a mortgage, cash, or any import/export operations.
You have 100,000 Euros in your account and you want to buy a commodity with a payment at delivery, so you ask your supplier to deliver and be paid only after delivery, and he will ask you to send a bank guarantee.
This is precisely the type of situation where the bank guarantee may be helpful: Your bank will block the sum of 100,000 Euros and send via internal means a message to your supplier’s bank saying in short the following: “We, Bank X guarantee the ABC LTD company up to a limit of 100,000 Euros for a transaction with the “Supplier” company to buy xyz items leaving from the … port, and arriving at the … port, transported by the … ship .. departure date ….. Upon receipt and verification of the goods, we guarantee the customer will make payment within X days”
The full text of an actual bank guarantee is spread over several pages and includes all the terms of the contract and transaction.
The first step in obtaining a bank guarantee is to provide to the issuing bank the fullest information related to the transaction, including contracts of purchase and sale of products or goods, so that it can draw up a Bank Guarantee.
We can establish through our partner banks all types of bank guarantees, these are personalized, between specific senders and recipients.