Depending on the specifics of the procedure, bank guarantees can be divided into many types (). If you look from the point of view of the method of providing, then there are two types: covered and uncovered.
Covered BG.
A feature of this type is that the principal covers the risks of the guarantor by purchasing a bill of exchange or opening a deposit account and placing a certain amount of money on it, which, depending on the requirements of the bank, may cover the guarantee amount in part or in full.
Such a guarantee is issued only after the principal provides cash coverage, which will be with the bank until the term of the BG expires. However, in this case, the interest rate for issuing a document is often much less than when issuing an uncovered BG, because in the event of a warranty event, and the client refuses to reimburse the bank in recourse cash paid to the customer, they can be cashed from the bill or withdrawn from the principal's deposit account. At the same time, applications for a security document with coverage are considered by credit institutions much faster, and the percentage of bank refusals on them is much lower.
Covered warranties can be used for both government and commercial contracts.
Uncovered BG.
In turn, they are divided into two types:
When issuing this type of guarantee credit organisation examines the documents of the principal company in more detail, evaluates its financial viability and business reputation. The advantage of such a document is that there is no need to withdraw funds from the turnover of the enterprise in order to provide them as coverage. However, the commission to the bank will be higher than in the case of a covered guarantee, but lower than the interest on a loan that can be taken from a bank to secure the contract in monetary terms to the customer.
Uncovered BGs can also be used to enforce obligations under government and commercial contracts.
Obtaining a bank guarantee is a process that has many subtleties and nuances. Often the conditions and requirements of the guarantor change and are selected for a specific client directly in the process of issuing a security document. To be sure that the option offered to you is the most profitable, contact RosTender! Experienced professionals will provide detailed information about all the offers of banks, and you will only have to choose.
Covered bank guarantee and uncovered bank guarantees: what is it?
As you know, for the execution of a single document - a bank guarantee, credit institutions receive remuneration. At the same time, it can be very solid, because the larger financial figures are indicated in the document, the more money the bank itself will earn. However, upon occurrence insured event bankers will have to pay the amount indicated in the document. Accordingly, the higher it is, the more the credit institution will have to fork out.
Naturally, in this situation, bankers always play it safe, carefully checking all borrowers, and in most cases they require collateral. A covered bank guarantee is an ideal document for a lending institution. This term means that the bank is provided with financial guarantees. It can be a deposit, bills and other securities. Bankers willingly accept real estate, expensive equipment, products and equipment as collateral. Today, virtually covered guarantees are issued by every credit institution that has the right to provide such services.
However, many companies cannot provide collateral to bankers. This is especially true for young or small firms. Meanwhile, they also want to participate in tender deals and earn money. In such situations, an uncovered bank guarantee is issued. Of course, the desire to draw up such documents from bankers is much less than in the first case. Everything is explained quite simply: the risks are higher, and bankers do not like to take risks. It is possible that credit institutions would not issue uncovered guarantees at all, but financial institutions also want to earn as much as possible and there is competition among them. In addition, the state insists on this, which wants to support, including small businesses, and strongly recommends issuing banks, including guarantees of this type.
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Bank guarantees differ in the way they are secured. In this regard, there are covered and uncovered bank guarantees.
Diversity banking services in the field of lending today is impressive. Also a large number of in the bank guarantee market. Due to the peculiarities in the design, it is customary to divide bank guarantees into covered and uncovered.
To issue an uncovered bank guarantee, the client must deposit property security. This is necessary in case of compensation for possible risks. The bank that provides the guarantee, or the so-called guarantor bank, bears material responsibility, and in case of non-fulfillment of the guarantee conditions, must pay the amount specified in the contract. Thus, for the bank there is a risk of losing money. The customer of the bank guarantee in case of bad faith of the contractor will receive compensation from the bank.
In case of avoidance financial obligations under unfulfilled conditions, the guarantor bank can return its funds by evaluating the pledged property. When issuing a bank guarantee, the bank must discuss the conditions in great detail, including those relating to collateral with the help of the pledged property. It must meet the requirements of the bank, because its cost must cover compensation payments. The property must also be attractive and in demand on the market so that it can be sold without problems.
Quite often, a covered bank guarantee is also issued. As already mentioned, the conditions for its registration are somewhat different. The peculiarity of this transaction is that the risks of the bank are covered with the funds invested by the executor in the bank's promissory notes. It is also possible to make a deposit in his name, the amount of which must correspond to that specified in the contract. As in the first case, the bank's risk tends to zero, because if the contractor fails to meet the conditions, all funds will be cashed out from the bills or withdrawn from the deposit account. Providing such guarantees makes it impossible for the bank to lose money. But, it is worth noting that financial condition does not always allow the customer to receive a guarantee from the bank.
The main difference of a covered bank guarantee is that it is issued only after the provision of cash cover, which, in certain cases, will cover the guarantee cost. In this case, the bank will automatically block the guarantee amount from the account. This amount will be blocked while the guarantee is valid. There are two coverage options:
Conclusion of a bank guarantee agreement
The positive aspects of a covered guarantee include the fact that it is convenient to use it when securing your obligations when concluding contracts for public procurement or contracts for other types of transactions. With a covered warranty, you can get deferrals for different payments or performance of duties.
The main advantage of a covered warranty is less interest rate than with an uncovered warranty. Perhaps that is why the covered bank guarantee is still more popular.
The covered guarantee has no restrictions from banks. That is, the amount can be absolutely any. An application filed for a specifically covered warranty is processed much more quickly. The guarantee can be obtained immediately after the submission of the documentation.
A covered bank guarantee is issued mainly upon receipt of serious contracts, special orders, in cooperation with the world's largest companies and enterprises.
There is also a type of guarantee called a bid-covered guarantee. It is provided to the client for his participation in bidding, tenders.
As for the uncovered guarantee, it is clear from the very name that it is carried out by credit or other financial institution without cover. Uncovered warranties are divided into secured and unsecured. The issuance of this type of guarantee is more related to a credit operation. Indeed, before its implementation, the bank, for the sake of its security, must check financial situation performer and present your conditions.
To receive such a guarantee, it is not necessary to withdraw money from the turnover of your company or enterprise for the period of the guarantee. Making a payment for a guarantee is much more convenient than borrowing a significant amount and making a contribution as a cover. In addition, if there is collateral, then there will be no problems with registration at all. Moreover, the terms of the uncovered guarantee are absolutely loyal.
Providing property on bail is only one of the options for obtaining a guarantee, but you can do without it quite calmly. Since obtaining an uncovered guarantee is possible in an unsecured form.
In addition, a third party may act as a pledger. A distinctive feature of an uncovered guarantee from a credit transaction is its payment. It is much less than creditor's interest, but more significant than a covered bank guarantee.
When a customer receives an uncovered guarantee, he also has a chance to receive serious, large-scale and high-value orders at the state, international, municipal or other level. Since, obtaining a guarantee shows the material compliance of a legal or natural person.
There are quite a few options for collateral in the collateral form of an uncovered guarantee. Only property to which the pledgor has a documented ownership right can be pledged on bail:
Below is a video about why you need a bank guarantee
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Being a tool for securing contractual obligations, bank guarantees, as loan products banks should also be secured, as banks always try to minimize their risks. The most preferred products for banks are covered bank guarantees provided against cash collateral, deposit or bank bills.
What is a covered bank guarantee? This is a guarantee issued against cash collateral in the form of a bank deposit for the amount of the guarantee obligation, a cash deposit for the amount of the guarantee and additional costs for the performance of guarantee obligations, or bank bills purchased by the principal. Bills of exchange are purchased for the amount of the guarantee and the costs of securing the contract and other obligations.
Uncovered are guarantees issued against other types of security (pledge of property, surety, guarantees of other banks).
For the guarantor, this is very beneficial, since his risk is minimized. If the client refuses to reimburse the bank's expenses for the fulfillment of guarantee obligations, he simply blocks the deposit and writes off funds from it in the amount of the expenses incurred. The bank does the same when registering a cash collateral as collateral.
Covered bank guarantees have certain advantages:
The disadvantages include that for the client covered bank guarantee- this is the freezing of working capital in the guarantor bank in the form of a deposit, bills of exchange or collateral, which is most often not profitable.
When choosing a way to secure obligations between a cash, property or uncovered bank guarantee, it is sometimes more profitable for companies to issue a cash deposit than a covered guarantee. Banks may charge interest on funds placed on deposits.
The basis for issuing an independent guarantee is the appeal of the principal and the agreement between him and the guarantor. It contains information about the guarantee and the main contract that it provides, the amount of the guarantor's commission and the form of the debtor's security of the obligation to the bank.
Promissory notes (promissory notes) of banks or other companies can be pledged upon receipt of bank guarantees. Bank bills have high liquidity and are readily accepted by guarantors. Companies can issue avalized bills against payment obligations of other banks.
RTS tender, an electronic trading platform, provides suppliers, participants in online trading with bank guarantees necessary to participate in tenders, conclude profitable government contracts, and receive advance payments. The service is provided by the authorized electronic financial service FINTENDER.RU. Bank guarantees can be issued both on the RTS-tender trading platform itself and on the website of the electronic financial service.
Uncovered guarantees are issued by a financial institution without cash backing. They are secured and unsecured. The issuance of such a bank guarantee (BG) resembles a credit transaction. That is, the financial position of the principal is checked and certain conditions are put forward by the institution that provides this species security.
The financial instrument will arouse interest on the part of those who do not want to divert funds from the company's turnover for the entire duration of the BG. It is much more profitable to pay for a guarantee than to attract impressive amounts to deposit them into the beneficiary's account to cover the guarantee.
In addition, an uncovered obligation is drawn up under loyal conditions.
For clearance not covered warranty is accepted as an additional, but not! mandatory security, since an uncovered BG can also be unsecured, a pledge in the form of property, goods in circulation, real estate, etc. can be accepted.
And, importantly, if necessary, even a third party can become a pledger.
Although an uncovered warranty is similar to credit operation, the fee for an uncovered bank guarantee is much lower than the interest on loans. But higher than for the covered BG.
By receiving this financial product, the principal not only confirms his solvency, but also gets a chance to become the owner of a serious and long-term state, commercial or municipal order.
If there is a need to provide a pledge, then any property that is owned by the pledger can become its subject:
Receipt banking products- a simple matter, if you immediately turn to us for help, because:
