Agreement Bank Guarantee

September 9, 2021

A bank guarantee is a guarantee that a bank grants to a contract between two external parties, a buyer and a seller, or with regard to the guarantee with an applicant and a beneficiary. The bank guarantee serves as risk managementRisk-Management includes the identification, analysis and response to risk factors that are part of the life of a company. This is usually done using a tool for the beneficiary, since the bank assumes responsibility for concluding the contract if the buyer is in arrears in his debt or commitment. Thus, a credit is more secure than there will be immediate repayment, since the bank participates in the transaction throughout the process. In the case of a bank guarantee, there must be an inability of the applicant to maintain the contract before the involvement of the bank. Thanks to the bank guarantee, the large manufacturer of agricultural machinery can shorten and simplify its supply chain Supply chain is the entire system of manufacturing and supplying a product or service, from the initial phase of the supply of raw materials to the end, without affecting its financial situation. A security is an obligation that is independent of liability for the principal debt or the agreement between the creditor and the principal debtor. By granting a guarantee, a bank undertakes to pay on the first request, provided that all the conditions laid down in this guarantee are met. Another important difference between bank guarantees and credit agreements lies in the parties that use them. Bank guarantees are usually used by contractors who propose large projects. By guaranteeing a bank guarantee, the contractor demonstrates its financial credibility. In essence, the guarantee assures the company behind the project that it is financially stable enough to assume it from start to finish. In contrast, flow-throughs are often used by companies that regularly import and export goods.

If the small seller gets the bank guarantee, the large company will enter into a contract with the seller. At that time, the company can pay the US$300,000 in advance, assuming the seller has to deliver the agreed parts the following year. If the seller is unable to do so, the manufacturer of agricultural machinery can claim from the bank the damages caused by the fact that the seller has violated the contractual conditions. Due to the general nature of a bank guarantee, there are many different types: in addition to normal bank guarantees, VTB Bank also issues counter-indemnities. The bank offers other types of collateral operations: a bank guarantee is when a lending institution promises to cover a loss when a borrower is in default of credit. The guarantee allows a company to buy what it could not buy otherwise to support the growth of its activities and encourage entrepreneurial activity. To request a guarantee, the customer must provide VTB Bank with the following documents: a bank guarantee is valid for a specified amount and a predetermined period. It shall clearly indicate the circumstances in which the guarantee applies to the contract. . . .