The bank guarantee is one of types of insurance of risks at reduction of transactions. The essence of such insurance is that all risks according to the transaction between economic entities gets bank, insurance company or other legal entity (guarantor) at the request of the participant of the transaction (principal). The guarantee is given in writing. In case of non-performance by the principal of the obligations to the creditor, the grant undertakes to cover losses of the last or in full, or in the volume specified in a guarantee.
Now such type of insurance of transactions is not so widespread in the Russian business, as in economies of Europe and the USA, however, a trend on its distribution in the last some years the positive.
In economic sense the guarantee differs not in much from the guarantee. That is, as well as at the guarantee, the bank guarantee insures risks of the creditor which he gets in the transaction with the borrower, however between these two concepts there are some distinctions.
Unlike which is part of the transaction, the bank guarantee is not part of the transaction which it provides. In other words, it is the unilateral transaction between the guarantor and the principal even if in the contract of a guarantee the reference to the transaction between the principal and the creditor is had. Obligations of the guarantor cannot change depending on development of the transaction which they provide. Even at recognition of the transaction between the principal and the creditor not valid, the bank guarantee continues to work.
The bank guarantee is issued for a certain term and cannot be withdrawn by the guarantor. The principles of urgency and irrevocability of the bank guarantee also consist in it. Without approval of the creditor or the principal, the guarantor cannot withdraw a guarantee. InfoAdvisor.net notes that cases of a response of guarantees are rather rare because strongly hurts reputation of the guarantor.
Advantages of bank guarantees
The bank guarantee gives a number of essential advantages, both to the principal, and the creditor.
The main advantage of the bank guarantee to the borrower is that at its existence the principal can participate in tenders for delivery to the state, and also municipal authorities of goods and services. Existence of the bank guarantee can help to obtain the commodity credit from suppliers. Suppliers in the presence of the bank guarantee can grant a delay in payment for period of validity of a guarantee, and, as a rule, the payment for providing the bank guarantee is lower, than a payment for borrowed funds with which it was possible to pay a debt.
Banks began to approach more liberally a question of the bank guarantee recently, without demanding additional providing, however, It should be noted that such guarantee will be more expensive.
For the creditor the bank guarantee also has a number of advantages. First, the transactions provided with the bank guarantee, less risky because if terms of the contract are not satisfied, the creditor will be able to demand indemnification from the guarantor. The guarantee is sufficient providing when carrying out advance payments. Existence of a guarantee, as a rule, says about a stable financial position of the principal that reduces risks from the conclusion of the contract with it.
The parties of the relations at the bank guarantee
In the course of action of the bank guarantee three parties participate: guarantor, principal (borrower) and beneficiary (creditor).
Any financial credit institution or insurance company can act as the guarantor in the course of action of the bank guarantee. However, according to the last requirements of the legislation, insurance companies cannot act as guarantors on receiving a state order.
The guarantees which are given out by other natural or legal entities including bodies of the state power, have no validity.
The principal, in the course of action of the bank guarantee, the person – the borrower under the contract which is provided with the bank guarantee is. It can be the supplier of goods or services, the buyer, the bank borrower, the tenant etc.
The beneficiary is the person who acts as the creditor in the relations which are provided with the bank guarantee.
Types of bank guarantees
Bank guarantees happen several types. The most widespread is the bank guarantee of the offer or as it is called still, a tender guarantee. This guarantee covers risks of the purchaser in case the principal breaks delivery time under the contract or refuses obligations after carrying out the tender.
The payment guarantee is the tool of a covering of risk of the seller from non-payments of the buyer. Such guarantee is often applied at the commodity credit or a delay of payment for already put goods or service.
The guarantee on customs payments is given by banks to importers of goods for ensuring payments of customs payments, sanctions for violation of customs rules.
The guarantee of performance is given to the supplier or the contractor for compensation of losses of the customer at non-performance by the top officials of terms of the contract.
The guarantee of return of payment means that the guarantor undertakes to compensate the sum of an advance payment if the principal does not fulfill the obligations assigned to it.
The guarantee of repayment of the loan is applied at credit operations.
Stages of formation of the bank guarantee
The bank guarantee passes some stages of the formation. At the first stage the principal in writing sends to the guarantor a guarantee request for extradition. Further the guarantor makes the decision on possibility of satisfaction of such request. On the third tap between the principal and the guarantor the contract on providing the bank guarantee then the first pays to the last remuneration is signed. After remuneration payment, the guarantor issues to the principal the bank guarantee in which are specified: period of validity of a guarantee, the sum for which the guarantee, the list of documents which the beneficiary together with the requirement has to provide is given out.