How to Get a Bank Guarantee in Nigeria
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Nowadays many people face situations in their business, contracts, etc
where for instance they want to expand, buy new techniques, deliver on
a job, use some rental service facilities. Obtaining a bank guarantee
has helped many execute contracts, expand businesses, and cover all
other necessary issues. In this article, you will find out how bank
guarantees help solve problems for people. First, what is a bank
guarantee, how does it work and how can you obtain one. Find out in
this article:
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Bank guarantees are services offered by financial institutions that
support a person and mostly businesses by vouching for their
creditworthiness and ability to meet obligations stated in a contract.
The bank guarantee is a promise or undertaking given by a bank on
behalf of a client (such as a business owner) to pay a stated sum of
money to another party (the beneficiary) if the client fails to carry
out an obligation. This agreement must be backed by evidence and
documents.
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A Bank Guarantee can also be referred to as a promise made by a bank
on behalf of its customer. The bank promises to be responsible for
whatever financial loss is incurred in the course of the customer’s
business engagement with the other party if the bank customer is
unable to pay. In other words, if the debtor or client fails to settle
a debt, the bank covers it. A bank guarantee thus enables the
customer, or debtor, to acquire goods, buy equipment or draw down
loans, and expand business activity. The extent of the bank’s
involvement is defined before the activity begins. The bank’s
liability can only be activated if the bank’s customer is unable or
fails to fulfill its own part of the contract agreement.
Types of Bank guarantees
Bank Guarantee can be direct or indirect. A direct bank guarantee is
the one issued by the bank in favour of its customer to facilitate
business between the customer and its business partner
Indirect Bank Guarantee is issued in favour of another bank to provide
financial confidence on a transaction. Bank Guarantees could act as
disadvantages to the banks. The bank customer’s request for a bank
guarantee goes through an approval process and tight security. Thus,
the process may differ from one bank to another. However, cash
security is the most common security acceptable for Bank Guarantees.
Bank Guarantee is sometimes referred to as a bond.
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Why and when do you need a Bank Guarantee?
There are various reasons for which one might need a bank guarantee,
this includes:If you are a principal awarding a contract or a job, you
can make use of a bank guarantee when you are in doubt of your
contractor’s ability to deliver on a job. With a Bank Guarantee, you
can delay payment till the job is completed to your satisfaction.
You can make use of a bank guarantee when you as a principal is making
payment in advance to a person to perform a job. A bank guarantee
assures you that your advanced money is secured till you have value
for your money or are satisfied with the job done.
Obtain a bank guarantee when you are awarding a contract and you want
to make sure that the successful bidder performs well on the job after
the bidding process has been completed.
You can obtain a bank guarantee when making orders for supplies and
want to be sure that the exact goods you ordered is what will be
delivered to you (in quality and quantity). A bank guarantee will give
some comfort to the supplier till you confirm the supplies are what
you ordered for.
How to Apply for a Bank Guarantee
Bank guarantees are not limited to only business owners, individuals
can apply for a bank guarantee as well. However, businesses mostly
receive the vast majority of guarantees. In most cases, bank
guarantees are not particularly difficult to obtain.
To request a guarantee, the account holder contacts the bank and fills
out an application form where you identify the amount needed for the
guarantee and reasons for which you are applying for the guarantee.
A typical bank guarantee application stipulates a specific period of
time for which the guarantee would be valid, special conditions for
payment and details about the beneficiary.
Sometimes the bank requires collateral. This could be in the form of a
pledge or agreement for assets, such as stocks, bonds, or cash
accounts.
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Types of Bank Guarantee
Advance Payment Guarantee
This is a form of bank guarantee issued by a bank to provide
confidence to a principal that the money paid in advance on a job
awarded to the bank customer will be used for the exact purpose for
which the advance was made.
Performance Guarantee or Performance Bond
A Performance Guarantee is issued by a bank at the request of its
customer at the instance of the principal who wants a form of
guarantee that the contractor will perform on a job awarded to them. A
performance guarantee gives comfort to its business partner that the
bank customer will perform as expected on a job.
This form of Bank Guarantee has the longest tenure as it is for the
total duration of the contracted period. It is mostly used in
construction contracts.
Bid Guarantee or Bid Bond
Bid bond is requested by the principal who wants to award a contract
to interested contractors. A bid bond acts as a form of assurance that
the job will be executed once the contractor is eventually awarded the
job.
It is often included as part of the contract bidding documents which
must be supplied by the willing contractors. If the contractor who
gets the job is eventually unable to execute it, the principal will
crystallize the bid bond and ask the bank to compensate them for the
inability of the contractor to execute the job.
Payment Guarantee or Comfort Letter
Payment Guarantee or comfort letter acts as a consolation issued by a
bank on behalf of its customer and in favour of a third party. The
comfort letter assures the third party that the bank will make
payments on behalf of its customer after some conditions have been
met. Such conditions can be delivery of goods in the right quality and
quantity or successful completion of a job awarded.
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Nowadays many people face situations in their business, contracts, etc
where for instance they want to expand, buy new techniques, deliver on
a job, use some rental service facilities. Obtaining a bank guarantee
has helped many execute contracts, expand businesses, and cover all
other necessary issues. In this article, you will find out how bank
guarantees help solve problems for people. First, what is a bank
guarantee, how does it work and how can you obtain one. Find out in
this article:
(adsbygoogle = window.adsbygoogle || []).push({});
Bank guarantees are services offered by financial institutions that
support a person and mostly businesses by vouching for their
creditworthiness and ability to meet obligations stated in a contract.
The bank guarantee is a promise or undertaking given by a bank on
behalf of a client (such as a business owner) to pay a stated sum of
money to another party (the beneficiary) if the client fails to carry
out an obligation. This agreement must be backed by evidence and
documents.
(adsbygoogle = window.adsbygoogle || []).push({});
A Bank Guarantee can also be referred to as a promise made by a bank
on behalf of its customer. The bank promises to be responsible for
whatever financial loss is incurred in the course of the customer’s
business engagement with the other party if the bank customer is
unable to pay. In other words, if the debtor or client fails to settle
a debt, the bank covers it. A bank guarantee thus enables the
customer, or debtor, to acquire goods, buy equipment or draw down
loans, and expand business activity. The extent of the bank’s
involvement is defined before the activity begins. The bank’s
liability can only be activated if the bank’s customer is unable or
fails to fulfill its own part of the contract agreement.
Types of Bank guarantees
Bank Guarantee can be direct or indirect. A direct bank guarantee is
the one issued by the bank in favour of its customer to facilitate
business between the customer and its business partner
Indirect Bank Guarantee is issued in favour of another bank to provide
financial confidence on a transaction. Bank Guarantees could act as
disadvantages to the banks. The bank customer’s request for a bank
guarantee goes through an approval process and tight security. Thus,
the process may differ from one bank to another. However, cash
security is the most common security acceptable for Bank Guarantees.
Bank Guarantee is sometimes referred to as a bond.
(adsbygoogle = window.adsbygoogle || []).push({});
Why and when do you need a Bank Guarantee?
There are various reasons for which one might need a bank guarantee,
this includes:If you are a principal awarding a contract or a job, you
can make use of a bank guarantee when you are in doubt of your
contractor’s ability to deliver on a job. With a Bank Guarantee, you
can delay payment till the job is completed to your satisfaction.
You can make use of a bank guarantee when you as a principal is making
payment in advance to a person to perform a job. A bank guarantee
assures you that your advanced money is secured till you have value
for your money or are satisfied with the job done.
Obtain a bank guarantee when you are awarding a contract and you want
to make sure that the successful bidder performs well on the job after
the bidding process has been completed.
You can obtain a bank guarantee when making orders for supplies and
want to be sure that the exact goods you ordered is what will be
delivered to you (in quality and quantity). A bank guarantee will give
some comfort to the supplier till you confirm the supplies are what
you ordered for.
How to Apply for a Bank Guarantee
Bank guarantees are not limited to only business owners, individuals
can apply for a bank guarantee as well. However, businesses mostly
receive the vast majority of guarantees. In most cases, bank
guarantees are not particularly difficult to obtain.
To request a guarantee, the account holder contacts the bank and fills
out an application form where you identify the amount needed for the
guarantee and reasons for which you are applying for the guarantee.
A typical bank guarantee application stipulates a specific period of
time for which the guarantee would be valid, special conditions for
payment and details about the beneficiary.
Sometimes the bank requires collateral. This could be in the form of a
pledge or agreement for assets, such as stocks, bonds, or cash
accounts.
(adsbygoogle = window.adsbygoogle || []).push({});
Types of Bank Guarantee
Advance Payment Guarantee
This is a form of bank guarantee issued by a bank to provide
confidence to a principal that the money paid in advance on a job
awarded to the bank customer will be used for the exact purpose for
which the advance was made.
Performance Guarantee or Performance Bond
A Performance Guarantee is issued by a bank at the request of its
customer at the instance of the principal who wants a form of
guarantee that the contractor will perform on a job awarded to them. A
performance guarantee gives comfort to its business partner that the
bank customer will perform as expected on a job.
This form of Bank Guarantee has the longest tenure as it is for the
total duration of the contracted period. It is mostly used in
construction contracts.
Bid Guarantee or Bid Bond
Bid bond is requested by the principal who wants to award a contract
to interested contractors. A bid bond acts as a form of assurance that
the job will be executed once the contractor is eventually awarded the
job.
It is often included as part of the contract bidding documents which
must be supplied by the willing contractors. If the contractor who
gets the job is eventually unable to execute it, the principal will
crystallize the bid bond and ask the bank to compensate them for the
inability of the contractor to execute the job.
Payment Guarantee or Comfort Letter
Payment Guarantee or comfort letter acts as a consolation issued by a
bank on behalf of its customer and in favour of a third party. The
comfort letter assures the third party that the bank will make
payments on behalf of its customer after some conditions have been
met. Such conditions can be delivery of goods in the right quality and
quantity or successful completion of a job awarded.
(adsbygoogle = window.adsbygoogle || []).push({});
(adsbygoogle = window.adsbygoogle || []).push({});
(adsbygoogle = window.adsbygoogle || []).push({});
jQuery(document).ready(function( $) { $.post(
'https://nigerianfinder.com/wp-admin/admin-ajax.php', {action:
'mts_view_count', id: '290568'}); });
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