BANK GUARANTEE BANK GUARANTEE is anagreement between 3 parties viz. Bank, Beneficiary & Applicant. APPLICANT BANK BENEFICIARY seeksguarantee | | | | takes the guarantee Period, amount, grace period, Adds to creditworthiness ligibility criterion & purpose - Assessment of business clearly specified. Confidence of Performance Valid for definite period Risk reduction 1. Financial 6. Foreignbank 2. Performance 7. Deferred payment 3. Advance payment 8. Shipping 4. Loan 9. Warranty Obligation 5._Bid-bond eFinanceManagement.comSTANDBY LETTER. OF CREDIT Ys. (SBLC) BANK GUARANTEE (BG) A standby letter of credit and a bank guarantee are actually very similar products. There are many similarities such as- + serve similar purpose * eredit checks + bankreplaces the applicant's credibility Nature Practice Usage Risk Coverage Legal A Secondary Payment Method Where Bank Promises The Payment If The Seller Fulfills Terms Of The Letter Of Credit. Covers a Host of Financial And Non-financial Performance Factors * Used In Long-term Contracts + Mare Commonly Used In International Trade Transactions * Covers The Financial Risk Of The Beneficiary Only + Beneficiary Has Double Coverage-issuing & Third Party Bank Subject to Banking Protocols UCP SOORISP 98 ItIs A Promise Of Payment From The Bank, it Is Based On A Contingent Obligation Only Concerned With Financial Performance * Used In Long-term & Short-term Contracts + Used In Domestic international Transactions. * May Cover The Financial Risk Of Both The Parties If Designed To DoSo. + Coverage From Only A Single Bank, A Simple Obligation Subject To The Civil LawBank guarantee is a written instrument issued by lending institutions to the beneficiary (seller) on behalf of the applicant (buyer). Under it, the bank promises to pay a certain amount of money to the beneficiary in case there isa default by the applicant in lieu of a fee from the applicant.LETTER OF GU. E Letter of Guarantee is a written contract that bank issues on behalf of its customers who enter a sale agreement to buy the goods from a supplier. C NEED |. ISSUING PROCESS Va ¥ Incase of New Supplier, there is Examination and Issue > Bank uncertainty between the parties charges the fees > Letter of v The companies in their starting days Guarantee Modification > do not have enough liquid funds Compensation against letter of ¥ Companies doing overseas business guarantee > Post Guarantee need to provide the Guarantee. management / eFinanceManagement.com