BANK GUARANTEE SERVICES FOR TRADE TRANSACTIONS

A bank guarantee is a commitment given by the issuing bank or financial institution to cover the losses if their customer ie. the buyer defaults or is unable to pay the seller. 

This way, bank guarantee services shift the risks of payment from the buyer to the guaranteeing bank, and prove the buyer’s credibility to the seller regarding timely & full-fledged payment.

In short, it is an authorization from a bank or FI that the liabilities of a buyer will be met and payment will be done only in case the buyer fails to do so. The buyer requests a bank to issue a BG in favor of the seller and a bank guarantee transaction consists of a bank/FI offering to repay the seller in the event of its applicant’s inability.