Bank Guarantee

A Bank Guarantee is a commitment by a bank to fulfill a client’s financial obligation if the client defaults, ensuring security for the beneficiary.

Banks issue various types of guarantees, including performance guarantees, bid bonds, and advance payment guarantees. Performance guarantees ensure contract completion, bid bonds secure tender processes, and advance payment guarantees protect prepayments.

For example, in construction contracts, performance guarantees ensure project completion. In procurement, bid bonds secure the tendering process. In trade, advance payment guarantees protect prepayments.

Bank guarantees provide financial security, facilitating trust in commercial transactions.