Under the bank guarantee the bank (the guarantor) issues in its own name and at the request of another person (the principal - the customer of the bank) a written obligation to pay the principal's creditor (beneficiary - supplier) an amount of money (to make a payment) in accordance with the terms of the guarantee.
Issued guarantee can be confirmed in the full amount or in part by another bank (confirmed guarantee). SBFP Bank provides you the opportunity to obtain confirmation of the bank guarantee issued by a first class bank.
How does bank guarantee work:
- Importer and exporter enter into a contract.
- The bank issues a bank guarantee of payment for the supplied goods.
- The guarantee can be transferred to the beneficiary in one of the following ways, depending on the terms specified in the bank guarantee application: directly to the beneficiary along with a cover letter, to the principal (to be further transferred to the beneficiary), by post or via teletransmission system.
- The seller delivers the goods.
- The importer pays or does not pay for the goods.
- The bank guarantee can be discharged by:
- repayment of the bank guarantee amount to the beneficiary;
- expiry of the bank guarantee;
- beneficiary's waiver of the bank guarantee claims by returning it to the guarantor;
- beneficiary's waiver of the bank guarantee claims by sending the guarantor a written notification of waiver of its obligations.
Bank guaranty advantages:
- On-demand guarantee: the guarantor undertakes to make a payment immediately upon request of the Beneficiary, executed in accordance with the terms of the guarantee;
- Conditional guarantee: the guarantor undertakes to make a payment upon the written request of the Beneficiary, executed in accordance with the terms of the guarantee and accompanied by the documents confirming the failure of the Principal to fulfill the obligation to the Beneficiary;
- The guarantor may not recall the bank guarantee, unless otherwise stipulated in the guarantee.
- The minimum time limit for payment by the bank to the Beneficiary in case the Principal fails to fulfill its obligations under the contract.
The bank guaranty is of advantage for the importer as suppliers tend to willingly accept bank guarantees and deliver goods without prepayment.
In order to get the guarantee of SBFP Bank you have to:
- submit a minimum set of necessary documents to the Bank.
- include the bank guarantee provision into the supply contract, specifying the guaranteed amount and the term of the guarantee.
- open a guarantee deposit account for crediting the guaranteed amount.