Various types of Bank Guarantees: Performance guarantee, Financial guarantee, Deferred payment guarantee

Bank guarantees are a type of financial instrument used to provide assurance to one party in a transaction that the other party will fulfill its obligations. There are several types of bank guarantees, including:

Performance guarantee: A performance guarantee is a type of bank guarantee that is used to ensure that a contractor or supplier will perform their obligations under a contract. If the contractor or supplier fails to perform as agreed, the beneficiary of the guarantee can make a claim against the bank to recover damages.

Financial guarantee: A financial guarantee is a type of bank guarantee that is used to provide assurance that a borrower will repay a loan or fulfill other financial obligations. Financial guarantees are often used in situations where the borrower’s creditworthiness is uncertain, such as for project finance or trade finance.

Deferred payment guarantee: A deferred payment guarantee is a type of bank guarantee that is used to provide assurance that a buyer will make payment for goods or services at a later date. This type of guarantee is often used in trade finance transactions, where the buyer may not have the necessary funds available at the time of purchase.

Other types of bank guarantees include:

Bid bond guarantee: A bid bond guarantee is a type of bank guarantee that is used to provide assurance to a project owner that a bidder will honor their bid if selected as the winning bidder.

Advance payment guarantee: An advance payment guarantee is a type of bank guarantee that is used to provide assurance that a supplier or contractor will refund an advance payment made by the buyer if they fail to fulfill their obligations under the contract.

Payment guarantee: A payment guarantee is a type of bank guarantee that is used to provide assurance that a seller will receive payment for goods or services sold to a buyer. Payment guarantees are often used in international trade transactions to reduce the risk of non-payment.