The most effective and useful security instrument in business. The aim of a guarantee is to protect against risks in relationships with business partners in case of failure to pay or risk of not having other contractual obligations fulfilled.
Guarantees are security instruments used in both domestic and international trade to reduce the risk of failure to pay or risk of not having other contractual obligations fulfilled.
By issuing a guarantee, the Issuing Bank takes on an irrevocable commitment to pay, irrespective of any objections by the Applicant, any amount up to the maximum guarantee amount, subject to the Beneficiary presenting in due time a written demand for payment, accompanied by other required documents and in accordance with the terms of the guarantee.
As a rule, Nova KBM issues irrevocable guarantees payable on first demand. Each such guarantee represents an abstract, stand-alone commitment of the bank and is separated from the underlying transaction.
| By receiving a bank guarantee, the risk of financial and business credit rating of your business partner is eliminated. If the partner does not fulfil their contractual obligation, you, as the Guarantee Beneficiary , can demand payment from the Issuing Bank (the Guarantor). It is therefore important that you only accept guarantees issued by banks with the appropriate credit rating. |
A received guarantee reduces the risk of failure to pay and risks of not having other contractual obligations fulfilled within the agreed deadlines. |
| The wording of the guarantee is important as well. At Nova KBM, we recommend that you accept guarantees subject to the Uniform Rules for Demand Guarantees (URDG) issued by the International Chamber of Commerce. This way, you will receive a guarantee that will be treated in a standardised and uniform manner by all parties to the guarantee transaction (i.e. the Applicant, the Guarantor, the Beneficiary) and in different parts of the world, regardless of any specific characteristics of local law. |
| By obtaining a guarantee from a bank issued to the benefit of your business partner, you demonstrate to your business partner that your business is earnest and that you are financially stable. |
| In case of public procurement or other tenders, obtaining a bank guarantee is, in most cases, one of the basic requirements to participate in the tender. |
| Payment security (Payment Guarantee, Zahlungsgarantie, Garanzia di pagamento), |
| Payment of import duties, taxes and charges (customs guarantee), |
| European community transit guarantee, |
| Security for the payment of excise duties (excise guarantee), |
| Other. |
| Ensures seriousness of the offer (Tender Guarantee, Bietungsgarantie, Garanzia di offerta), |
| Ensures the refund of the advance payment (Advance Payment Guarantee, Anzahlungsgarantie, Garanzia di rimborso d'acconto), |
Ensures good performance (Performance Guarantee, Erfuellungsgarantie, Garanzia di buona esecuzione), |
| Ensures the elimination of defects within the warranty period (Guarantee for Warranty Obligations / Warranty Guarantee and Retention Money Guarantee, Gewaehrleistungsgarantie and Haftrücklassgarantie, Garanzia di buon funzionamento). |
CONSULT WITH US
Need more information?
Contact our relationship managers, who will be glad to help you make your final decision.
