Today, most specialists in banking structures believe that a bank guarantee is one of the most reliable ways of providing security. It can be a guarantee of the fulfillment of obligations assumed by the lending party and the debtor.
It is also worth noting that the bank’s guarantee, as a security for the fulfillment of all obligations assumed for municipal and state needs, is currently used in more than 80% of cases, if we compare the guarantee and other security methods.
What is a good bank guarantee and what are its advantages?
First of all, it is worth saying that this commercial instrument is considered irrevocable. This means that the bank that gives this type of document does not have the right to revoke it only at will.
In addition, the bank’s advance payment guarantee is independent of the underlying obligation. This can literally mean the following: the performance of the underlying debt will not affect the conditions set out in the bank guarantee, nor will it terminate its validity.
Also, the advantage of a bank guarantee is that it has a fairly low cost. This can be especially felt if you compare the price of loans. In addition, it is also worth determining the advantages of a bank guarantee for the borrower and for the lender separately. If we are talking about a debtor, BG will allow him to get a deferred payment under the contract.
Small businesses and larger companies
The consumer can use the services or products themselves right now. Also, when receiving the service, the debtor will be able to get a financial loan with a bank guarantee. And commercial organizations provide regular customers with the opportunity to use this service under special promotional conditions.
At the same time, for the lender, BG allows you to get confidence that settlements with it will be made with the fulfillment of obligations. Moreover, such a financial instrument provides a guarantee of protection of possible risks.
The advantages of such a guarantee are that it helps to get rid of various risks, avoid using your own funds from the company’s capital, etc. All these points are very important for both small businesses and larger companies. A bank guarantee has a lot of important advantages, and if you compare it with other security methods, then you can find another significant plus in such a document, it is a relatively small amount of commission that the bank charges for issuing this paper. If you are still thinking about whether you need a bank guarantee, then you should properly evaluate its value, taking into account its advantages, and then make the right decision.