A bank guarantee is a type of contract between a bank and an individual that is formed in the event that the individual wishes to invest a certain sum of money in order to initiate business. The agreement stipulates that the bank will settle the debt of the individual and make a full payment to the seller in the event that the individual fails to make it.
For more information on bank guarantees and the payment solutions we can provide you with, visit our Bank Guarantee services page.
The basics of bank guarantees
This type of warranty from the bank allows individuals to apply for a loan or pay for goods and services to initiate business activity. This guarantee enables investors to build their business by utilizing goods and services that they can pay off at a later date, thus having the freedom to invest on a large scale. Ultimately the bank guarantee only covers a specific amount of funds that the investor and bank agrees on, with the contract outlining the time period that it will last for.
The bank guarantee acts as a contractual agreement between the investor and a third party, e.g. the seller, thus granting the investor a good credibility. This payment solution requires the investor to have good standing in terms of credibility, as the bank is likely to run a risk assessment.
The initial investment will require the individual to obtain a bank guarantee as it will provide the third party with the warranty that the investor will pay off their debt if they are unsuccessful in their business venture. To obtain the bank guarantee the bank will secure the amount of money sought by the applicant as security for the bank in the event that the applicant fails to meet their payments.