UAE is considered to be the business hub in the Middle East. There are lots of companies that are involved in the export-import business. In matters of globally trading, and processing deals, a bank guarantee bears extreme significance. In this regard, you will be well advised to consider the fantastic combination of bank guarantee charges at Credico Capital, for facilitating the various procedures for trading with stakeholders on a global level. It is crucial to consult an expert in the field if you want to ensure security and free flow of funds. The transactions are required to be flawless. Carry on reading to know more on this topic.
A Bank Guarantee in Simple Terms
A bank guarantee is an official document that ensures safety of business transactions among various stakeholders involved in a deal, especially an international trade deal, which reduces the risk of non-payment from the buyer or the contractor. In this case, the bank provides a guarantee that in case there arises a situation of non-payment; you can get it paid by the bank, which acts as a mediator in the dynamics of the deal. This considerably decreases the risk involved in the business. Also, it is a professional approach to guarantee payment.
Stakeholders Involved in Guarantee
Broadly speaking, there are three different parties involved in processing a bank guarantee. Without the presence of any of these stakeholders, there is no significance of a guarantee in the financial model. The stakeholders are:
Beneficiary: Beneficiary is the client who files a request for payment for the products or services that he sells. It is the beneficiary that receives the funds or the amount from the funding agency in case there is a situation of non-payment
Principal: The borrower is known as the Principal. The Principal initiates the bank for the guarantee. This results in the issuance of the instrument
Guarantor: A Guarantor is usually a bank, a funding agency or a financial organization. It, on given conditions, assumes the required obligations to pay the client in situations of non-payment. A Guarantor complies by the terms of an issued bank guarantee, after the payment request has been processed in full.
Various Bank Guarantees in the UAE
UAE has an excellent financial environment to initiate issuances of different types of bank guarantees, without technical or administrative hassles. Each of them has an importance of its own.
- Payment guarantee
- Tender guarantee (this is also known as a tender bond)
- Guarantees related to taxes and related customs
- Payment guarantees in advance
- Performance guarantee
For getting more details on bank guarantee, connect to a reliable guarantor and strengthen your import-export business prospects.