An assurance to a beneficiary that the bank will uphold a contract if the applicant and counterparty to the contract are unable to do so. A guarantee means giving something as security. A bank guarantee is when a bank offers surety and guarantees for different business obligation on behalf of their customers within certain regulations.It is generally a promise made by the bank to any third person to undertake the payment risk on behalf of its customers.
A bank guarantee is a type of guarantee from a lending institution. The bank guarantee means a lending institution ensures that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it. A bank guarantee enables the customer, or debtor, to acquire goods, buy equipment or draw down a loan.
Because of the general nature of a bank guarantee there are many kinds. Here are some common examples: A payment guarantee assures a seller the purchase price is paid on a set date. An advance payment guarantee acts as collateral for reimbursing advance payment from the buyer if the seller does not supply the specified goods per the contract. A credit security bond serves as collateral for repaying a loan. A rental guarantee serves as collateral for rental agreement payments
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