A lot of individuals especially business owners are struggling to achieve financial stability. That is why, they are looking for services that can help them. Fortunately, banking and lending companies provide different financial services. And, one of the most popular services business owners make use of is a bank guarantee funding.
What is Bank Guarantee?
A bank guarantee is a service offered by a banking or lending institution to ensure that liabilities of a debtor will be met. Therefore, if a debtor has failed to settle their debts, the bank or lending company will cover it.
Some financial experts claim that bank guarantees have similar characteristics to other financial instruments, but they are unique due to their high value, flexibility, resale potential, and discount. As a result, this allows the investor to earn interest with minimal risk, while still retaining access to liquidity.
Benefits of Bank Guarantees
As of now, sellers and customers can make use of funding solution into their advantage since it offers wonderful features. These include the following.
First and foremost, buyers are not required to make the advance payment in case of bank guarantee. Because of this, they can make use of their funds in other important ventures.
When using such funding, buyers can also make use of various opportunities since they can work with different and reliable partners at local and international markets.
This funding solution also protect sellers from they are able to perform prompt sales without asking advance payment.
Finally, this funding solution also requires less number of documents as well as no necessity for collateral. Thus, individuals who apply for a bank guarantee can receive funding within shorter periods of time. Not to mention, commission fee for such services is also very low.
Types of Bank Guarantees
In order to accommodate the needs of individuals, banking and lending institutions offer different types of bank guarantees such as:
Advance Payment Guarantee – Advance payment is a type of guarantee that is commonly used by a buyer in order to give you partial payments. This guarantee also acts as an insurance that the partial payment will be returned if certain conditions are not met.
Letter of Credit – This type of guarantee is issued by a bank to a buyer to pay for products or services. However, this can only be used when sellers comply the terms and conditions of the credit.
Tender Guarantee – Tender guarantee also known as bid bond is used by companies who wish to work with large companies. With this guarantee, companies can provide the assurance their partners are looking for.
These are only some of the facts that individuals need to know to help them make their finances better and more effective.