Bank guarantee

 

Description

 

When to apply bank guarantee?

 

If you are getting ready for:

  • participating in the tender for performing works, providing services or supplying goods;
  • assuming contractual and/or payment liabilities;
  • receiving advance payment for complying with the contractual obligations;
  • assuming contractual obligations to ensure the quality  of the performed work, service provided or the goods supplied;
  • importing goods under the condition to pay in cash usually being obliged to apply for the provision of credit for making the payment.

 

You have concluded an agreement for the supply of goods with a foreign company and you continue to pay for the imported goods in cash. It means that you are paying for goods that are not received yet. Is it what a civil trade dictates?

For sure, no. The permanent and trustful cooperation between the partners presumes mutually beneficial conditions. Thus, your supplier  having in his hand the guarantee of ACBA-CREDIT  AGRICOLE  BANK can provide a deferred payment  (e.g. up to 120 days, as a result of that you can do  the payment with your own resources (without a necessity to attract credit funds). Let us mention that the guarantee is unparalleledly cheaper than the credit.

 

ACBA-CREDIT AGRICOL BANK offers to apply bank guarantee.  

The guarantee is the written commitment given by the bank  upon the instruction of one of the parties  (the Principal) in favor of a third party (the Beneficiary) that ensures the fulfillment of the Principal’s  liabilities and payment of certain amount to the Beneficiary in compliance  with the terms and conditions  of the guarantee upon presenting a written demand.  

 

Advantages

 

Advantages of the guarantee for the buyer (importer):  

 

  • import goods with a deferred payment term (due to the letter of guarantee the term of payment in cash can be replaced by the deferred payment term);
  • due to the deferred payment term  make the payment for goods without attracting credit resources;
  • reduce the costs since the bank guarantee is unparalleledly  cheaper;  
  • establish more trustworthy  relations in cooperation with the partner.  

 

The advantages of the guarantee for the client, seller (exporter)

  • having a guarantee securing the payment liabilities of the buyer (importer) you insure yourself of the risk of non- payment by your buyer (importer);
  • ensure the reimbursement of possible losses and expenses that can be caused by the  failure to comply with his/her  contractual obligations or by the improper compliance with therewith by the company that is the  winner of the tender, performer of the works, provider of the services or supplier of the goods; 
  • you can act in the market with a more  competitive offer in comparison with your competitors by selling (exporting) the goods with a deferred  payment term;
  • due to acting with a competitive offer you can provide for  bigger volumes of consumption and,  consequently,  increase  your company’s share in the market;
  • bring the risks existing in the commercial transaction to the minimum.

Types

 

The Bank provides the following types of guarantees:

  • guarantee for participation in the tender- ensures the reimbursement of the costs of the company holding the tender when the bidder  that  was recognized the winner of the tender refuses to fulfill its further  liabilities as a result of which there arises a necessity  to hold another tender;
  • guarantee for the fulfillment of the contract- ensures the due compliance with the liabilities assumed under the contract by the party  fulfilling the contract towards the client;
  • payment guarantee- ensures the due compliance with the payment liabilities by the buyer (importer) towards the seller (exporter);
  • guarantee for the return of advance payment- ensures the reimbursement  of the amount of advance payment to the buyer (importer) or to the client in case the seller (exporter) or the executor of the contract fails to comply with his/her liabilities assumed under the contract; quality guarantee- ensures the qualitative characteristics of the work performed /services provided/goods supplied by the contract executor or the elimination of the generated defaults in time;
  • counter (indirect) guarantee- provision of a guarantee by the Bank in favor of another leading bank in execution of the provision of the guarantee  by the given bank in favor of the final beneficiary at  its full risk.

 

Disbursement terms and conditions

 

  • Due to the high trust acquired by ACBA-CREDIT AGRICOLE BANK  the guarantee provided by the Bank is nowadays accepted by many  foreign companies which allows to cooperate with them directly without the intermediation  of another  bank, which in its turn reduces the service fee for the guarantee.
  • Let us mention that a number of  leading banks and financial organizations (CREDIT AGRICOLE CIB, COMMERZBANK AG, EBRD) have provided to the Bank with credit limits for performing  transactions related to the financing of trade. Thus, in all the cases when the Beneficiary requires a guarantee disbursed by a local bank or another bank ACBA-CREDIT AGRICOLE BANK,   in cooperation with the above mentioned banks, ensures the satisfaction of the Beneficiary’s demand.    

 

Main terms for the disbursement of the guarantee  

 

  • RA resident and nonresident legal entities, economic entities and rural communities, as well as resident legal entities, economic entities, rural communities, state establishments and financial organization  acting within the  RA territory can apply for the disbursement of the guarantee/counter guarantee; 
  • The Bank disburses the guarantee/counter guarantee in favor of resident and nonresident legal entities, organizations, economic entities, state establishments and financial organizations;
  • The currencies of the guarantee are AMD and  foreign currency
  • The maximum duration of the guarantee is 48 months. 

 

FAQ

 

1. Which is the main difference between the guarantee and the letter of credit?  

-In difference to documentary letter of credit the guarantee is not a form of calculation but is rather used only in case the Principal did not comply with his/her liabilities towards the Beneficiary.

2. What should be the validity term of the guarantee?

-The guarantee validity term should exceed the contractual term of the final calculation so as the Beneficiary has a possibility to demand payment from the Bank in case he/she does not receive the corresponding payment from the Principal. 

3.  Can the validity term of the guarantee be terminated prematurely?  

- The guarantee can be terminated prematurely, provided that the letter of the Beneficiary on the waiver of his rights is vested by the provided guarantee. 

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