Products offered to customers with a payment obligation pledge and guarantee to the third party upon request, divided into three local guarantees and letter of credits (international guarantees).

This includes;

  • Letters of credits and bills of collection (postponed access) and the collection of individuals and bank’s credit documents and guarantees.
  • Guarantees that include; tender guarantee entry, advance payment, proper implementation, maintenance and guarantees payment.

A written pledge issued by a bank (called the exporter) under the purchaser application (the applicant) in favor of the seller (beneficiary). Under this LC, the bank shall pay a specific amount within a certain period whenever the seller submits commodities' documents at the real time according to credit conditions instructions. The bank compliance with payment may be in cash upon reviewing the documents or forward.

Letter of Credit is an important tool used in financing foreign trade. It represents the frame that gains the acceptance of all internal parties in international trade square, keeping the interest of all parties whether the exporters or importers and with regard to the exporter, it has the warranty- through LC – that it would obtain commodities' value that he entered into a contract to import, upon submitting documents that conform credit conditions to the bank notifying him of the credit arrival.

By having LC, with regard to the exporter, it warrants that the exporter will receive the value of commodities contracted to export promptly upon submitting the documents which meet and conform the Letter of Credit’s conditions to the bank who notified him of having received the letter of Credit.

With regard to the importer, it further warrants that the issuing bank of LC will not pay value of commodities contracted to be imported unless having the documents conformed with opened LC conditions.

LCs’ Financing Benefits

  • A guaranteed tool for sellers to receive the goods with a bank guarantee frame ensured in exchange of matching conditions documents and not by the buyer.
  • Seller receives good value upon submitting shipping documents without waiting for the buyer to receive the goods.
  • Buyer can receive a guarantee to be used as a cover-up vs. another credit (back to back)
  • Reassure the buyer that his bank will refuse to pay if the seller does not comply with the specific terms of his knowledge of dependence.
  • Buyer can obtain a guarantee whereby using banking facilities and refinance “buyers facilities”
  • Facilitating business and trade procedures

 

 

 

Banking Guarantees are written pledges issued by the bank at the request of his client, for which the bank commits to pay the bail or a part of it upon beneficiary’s request, during a specific order mentioned in the letter of guarantee illustrating the reason for which the bail was issued.

Guarantees Parties

  • First party: Bank Client (Company - purchaser)
  • Second Party: LC issuing bank, the source that issues the pledge to pay for the operation during a certain period and for a specific purpose
  • Third Party: The beneficiary of the guarantee and the guarantee issued in its favor.

Types of Guarantees

  • Bid Bond Guarantee, issued for a specific guarantee purpose, usually constitute a certain percentage of the bid or be predetermined value
  • Performance bond guarantee, Issued for the purpose of proper implementation of the project technical specifications agreed upon, and are often worth 10% of the contract value, and expire at the end of the project.
  • Maintenance bond, usually for a period of a year from the date of delivery of the project to ensure that there is no defect in the implementation process and its often 5% of the contract value.
  • Advanced payment bond, issued in order to provide liquidity to the contractor to implement the project as quickly as necessary and represents a certain percentage depending on the agreement between the company and the owner.

 

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