How to get a loan against bank

guarantee?
 Bank guarantee

A bank guarantee is when a lending establishment promises to cover a loss if a borrower

defaults on a loan. The guarantee lets a company buy what it otherwise could not, serving
business growth and promoting human actions. Bank Guarantee process can be different for
different banks depending on a country’s norms and regulations.

A bank guarantee letter is a kind of agreement issued by a bank on the benefit of a client
who has entered an agreement to buy merchandise from a provider. The letter of guarantee lets
the provider realize that they will be paid, regardless of whether the client of the bank defaults.
There are various kinds of bank guarantees, including direct and indirect guarantees.
Banks typically use direct guarantees in foreign or domestic business, issued directly to the
receiver, which can be more easily adapted to foreign legal systems and practices since
they don't have form requirements. Direct guarantees apply when the bank’s security does
not trust on the existence, validity, and enforceability of the main responsibility.

Indirect guarantees happen most rarely 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
needs. With an indirect guarantee, one uses a second bank, typically a foreign bank with a
head office in the receiver’s country.
 Why Bank Guarantee is important?

• Add to a creditworthiness:
BGs reflect the confidence of the bank in your business and indirectly certify the soundness of
your business.

• Classification of business:
On account of remote exchanges or exchanges with Government associations, the outside
gathering or a Government Undertaking is obliged and can't survey the soundness of every
single candidate to a task. In such cases, BGs go about as a believed instrument to survey
strength and financial soundness of organizations applying for undertakings.
• The confidence of performance:
When new parties associate in the business and are skeptic about the performance of
the company undertaking the project, the performance of bank guarantee help in reducing
the risk of the beneficiary.

• Risk reduction
Bank Guarantee fees are nominal in nature and Advance payment guarantees act as a
covering wherein the purchaser can recover the amount in advance to the seller if a seller
fails to deliver the goods or services. This assist against any probable loss that a party can
endure from a new seller.
 Main types of bank guarantees
1. Guarantee of payment:
This type of guarantee is a security of payment obligations of Purchaser to Seller.

2. Guarantees of advance payment return:

This guarantee represents an obligation of the bank to return the payment in advance, after
receiving an advance, the Seller does not perform its written agreement obligations.

3. Contract process guarantee:

This guarantee is a security of timely delivery of goods or services according to a contract.
4. Tender guarantees:
This guarantee plays a role of security in those cases when the Company fails to perform its
obligations to a tender establishment or other parties that are stipulated in the order received
by winning the tender.

5. Guarantee in favor of the customs authorities:

This guarantee is a security of obligation of the establishment performing import and export
transactions for payment of custom duties and taxes.

6. Guarantees of warranty execution:

This guarantee plays a function of security of quality for delivery to the contract terms.

7. Guarantee of credit return:

This guarantee is a security for repayment of credit.
THANK YOU!