Type of bank guarantee. Providing a bank guarantee

One way to ensure financial obligations, when the lending institution must pay the beneficiary at the request of the principal, are bank guarantees. These conditions are prescribed in the contract. A bank guarantee can be considered a payment document only if it is made in strict accordance with the current legislation.

The Essence

A bank guarantee contract is one of the most popular financial instruments. The lending institution, when signing the document, simply confirms the solvency of the performer. But at the same time, it guarantees the fulfillment of obligations. Such an additional protection tool gives confidence in the performance of work in the specified time.

Companies often work with state organizations. In this case, long-term contracts of cooperation are usually concluded. When a certain sector of the economy is activated , a tender for work is announced. One of the requirements that is presented to the winner is to provide a full package of documents for processing bank guarantees. So the seriousness of intentions is confirmed.

Why is this necessary?

The issuance of bank guarantees is most often performed when concluding large-value contracts. In this case, this tool acts as a kind of insurance for all the groans of the transaction. The credit institution monitors compliance with the terms of the transaction. And even if the partner goes bankrupt, the beneficiary will still receive a reward. All types of bank guarantees and sureties are used to prevent the occurrence of financial risks.

Participants in the relationship

• The guarantor bank (sometimes an insurance company) is an organization that assumes the responsibility to make payment to the beneficiary upon the occurrence of certain circumstances.
• The principal is a debtor, a borrower, a person who pays a reward.
• The beneficiary is the beneficiary.

Type of bank guarantee

• Unconditional. The bank is obliged to transfer funds at the written request of the beneficiary. At the same time, the application must be drawn up in strict form.
• The application of the beneficiary must be supported by documents that confirm the failure of the principal to fulfill his obligations.
• Secured is a type of bank guarantee that is issued on bail.
• The fulfillment of obligations by the principal can be additionally confirmed by another bank, which is jointly and severally liable to the beneficiary. Several credit institutions can participate in the transaction. This type of bank guarantee is called syndicated. It is most often used in international transactions. The more banks are involved, the more expensive the service will be.
• If the obligation is accepted by one credit institution, then this kind of transaction is called direct. If the bank on behalf of the principal requires confirmation of the fulfillment of the terms of the transaction from another financial institution, then this is a counter-guarantee. Such contracts are also more often used in international transactions.

Principle of operation

The lender provides funds to the principal. As a confirmation of the fulfillment of obligations, a contract is concluded. If the borrower has not returned the funds, then the claims are made to the principal's bank. Copies of documents from the beneficiary are sent there. The specified amount is transferred to the beneficiary's account. A credit institution may present a recourse to the principal. The document comes into force from the moment of signing and is valid until the time limit stipulated in the delivery schedule.

Stages of registration

1. Presentation of the pre-guarantee letter by the borrower with the consent of the guarantor bank to ensure the repayment of the loan.

2. Obtaining permission from the financial institution of the beneficiary.

3. Drawing up and signing documents.

Nuances

A bank guarantee agreement is concluded between three participants: the principal, the beneficiary and the bank. The document fixes the amount of remuneration. In the event of a breach of the obligation, the bank shall present the claimant with a regressive nature. The amount of remuneration is also prescribed in advance in the document. The presence of this clause in the contract is beneficial primarily to the principal. The bank will not be able to raise too high demands or overestimate the amount of penalties. A notarized copy of the credit institution license must be attached to the contract.

Such contracts are highly reliable and quickly implemented instruments that bring additional income to the financial institution and do not require diversion of funds from turnover. Russian financial institutions make such documents, provided that the client has a bank guarantee (securities, commodities, etc.), and with old partners work on conditions of a direct debit of the amount of debt from the account.

The contract is only in writing and must be sealed with the seal and signatures of the parties. The document should also state that:

• The beneficiary will receive the full amount specified in the contract;
• The validity period of the document is limited;
• If the beneficiary refuses to receive remuneration, he must return the guarantee to the organization that provided it.

Other information:

• Name of the parties (guarantor and principal).
• The name of the documents on the delivery of goods.
• The maximum amount of payment.
• Terms of guarantee.
• Termination of the contract.
• Rules for making payments.

Conclusion

To confirm the seriousness of intentions and minimize financial risks, especially when concluding international transactions, participants can issue a bank guarantee. The credit organization undertakes to transfer money to the account of the beneficiary under certain conditions. Regardless of what type of bank guarantee is used, the financial institution simply confirms the client's solvency. Registration of documents will cost 1-5% of the transaction amount. Credit costs more. Yes, and counterparties are more likely to cooperate if the client agrees to sign a bank guarantee.