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Provides guarantee favouring a third party for performance, payment, etc. |
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Types of guarantees: |
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Tender Guarantee or Bid Bond |
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Performance Guarantee |
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Advance Payment Guarantee |
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Warranty of Maintenance Guarantee |
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Retention Guarantee |
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Security Guarantee |
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Shows the customer's/applicant's capability to perform work as specified in the contract. |
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Able to obtain more favourable trade terms from the beneficiary if a BG is produced. |
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No necessity to raise cash to meet deposit requirements and funds could be used to support working capital requirements. |
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Allows customers to have access to funds especially where BG is issued for advance payment or release of retention funds under contracts. |
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To expedite the release of goods which have arrived before the original transport documents. |
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Issuing of guarantee by the financial institution to the shipping agent to release goods without production of original transport documents. |
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Usually issued where the goods are initially imported under Letter of Credit and is to be earmarked against trust receipts/banker's acceptance faclities. |
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Facilitate meeting of production or contract deadlines. |
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