A Bank guarantee it's a document whereby a bank guarantees payment of a financial obligation on the part of the guarantor in the event that the guarantor cannot meet the payment itself. That is, it is a warranty offered by the bank in favor of one of the parties involved in a financial transaction, in order to ensure compliance with contracted obligations.
He Bank guarantee It can be used in different types of financial operations, such as purchase and sale operations, tenders, granting of loans or leasing, among others. In these operations, the Bank guarantee It may be required by one of the parties as a guarantee of compliance with the obligations contracted by the other party.
It is important to note that the Bank guarantee It is not a form of financing, but a guarantee granted by the bank. Therefore, if financing is required to carry out an operation, other financial alternatives should be sought.
In the event that the guaranteed party does not comply with its obligations, the bank must pay the debt in its place. Therefore, it is important that the guarantor complies with the conditions and terms established in the contract that oblige him to meet the contracted obligation, to avoid payment by the bank and the possible economic and legal consequences that this entails.
What types of bank guarantees exist?
There are different types of bank guarantees that financial institutions can offer, among which are:
- personal bank guarantee: This guarantee is based on the solvency of a natural person who undertakes to pay the debtor's debt in the event that the debtor is unable to pay.
- Company bank guarantee: In this case, the financial entity relies on the solvency of a company to guarantee the debtor's debt in case of default.
- Technical bank guarantee: This type of guarantee is used in the construction and public works sector, and guarantees compliance with the contractor's contractual obligations.
- Customs bank guarantee: This guarantee is used in import and export operations and guarantees the payment of taxes and customs duties.
- Judicial bank guarantee: It is used in legal processes, and guarantees the payment of possible compensation to which the debtor may be obliged.
each kind of Bank guarantee has its own specific conditions and requirements, so it is important to carefully assess which one is most suitable for each situation.
How does a bank guarantee work?
He Bank guarantee It works as a guarantee for the creditor in case the debtor cannot meet his payment obligations. In this sense, the financial entity undertakes to pay the debt in the event that the debtor does not do so, thus assuming a risk in the event of non-payment.
To get a Bank guarantee, it is necessary to comply with a series of requirements that may vary depending on the type of guarantee requested and the policies of the financial institution. In general, it is required to present a series of documents that prove the solvency of the applicant, as well as an analysis of the financial situation of the debtor and the additional guarantees that it can offer.
It is important to highlight that the Bank guarantee It is not a free instrument, since the financial institution charges a commission for its issuance, which usually ranges between 1% and 5% of the guaranteed amount. In addition, the guarantor is also obliged to pay the interest generated by the debt in case of non-payment by the debtor.
