Bonds and Guarantees
Use Guarantees (also known as Bonds) to give new buyers confidence in your ability to make payment or perform under a contract.
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Tender Guarantee (Bid Bond)
Compensates the buyer/beneficiary if tender is withdrawn or the supplier declines to sign contract. The typical value of the Guarantee against the overall contract value is 2-5%.
Advance Payment Guarantee
Provides comfort to the buyer/beneficiary of repayment of advances if the supplier fails to perform in line with the agreed contract. Typically 10-40% of contract value.
Standby Letters of Credit
Effectively performs the same function as Guarantees – normally a ‘back-up’ Guarantee of payment if buyer doesn’t pay for goods.
HMRC Guarantees
Can defer payment of customs and excise duties.
Performance Guarantee
A Guarantee against failure to perform an agreed contract. Typically 10-20% of contract value.
Retention Guarantee
Where it has been agreed that the buyer/beneficiary retains a portion of the payment for a certain period, the exporter will request its bank to issue a retention bond in favour of the buyer as security. This type of Guarantee protects the buyer from non-fulfilment of the contract terms. Typically 5-10% of contract value.
Warranty Bonds
Provide security to the buyer/beneficiary that the goods or services supplied will perform as per the contract under the specified warranty terms. If they do not, the Guarantee can be called on by the beneficiary.
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