The Ultimate Guide to Bank Guarantees: Unlocking Financial Security
A bank guarantee is a written undertaking by a bank to a beneficiary, typically a seller or contractor, that the bank will pay a certain sum of money if the party that initially promised to pay (the principal debtor) fails to fulfill their obligation.
Bank guarantees are often used in commercial transactions to reduce the risk of non-payment. They are particularly useful in international trade, where the parties involved may not know each other well and there is a greater risk of default. Bank guarantees can also be used to secure loans or other financial obligations.