Bank Guarantee
Bank Guarantee
A bank guarantee is a promise made by a lending institution to ensure that a debtor will fulfill their obligations.
In other words, the bank pays the loan if the debtor is unable to do so. A bank guarantee gives the client, or debtor, the ability to obtain products, purchase machinery, or obtain loans, so increasing company activity.
You can be requested by a client to produce a bank guarantee from a third party, like a bank. This guarantee covers a specific sum, which is typically a portion of the whole contract value. The Bank Guarantee is only good for a certain amount of time before it expires.
A bank guarantee will be provided by the smaller company in a transaction between a large and small organization since the larger organization (Supply) runs the risk of not getting paid for the goods or services it provided (Customer). In the event that the smaller organization is unable to deliver, a bank guarantee guarantees that the larger organization will receive the money.
Go to: to see the Bank Guarantee list.
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1. How to create a Bank Guarantee
1.Go to the Bank Guarantee list and click on New.
2.Select the type whether you're Receiving a Bank Guarantee from a Customer or Providing it to a Supplier.
3.Set the Start Date and under 'Validity in Days' enter the number of days the guarantee is valid for.
4.Select the Sales Order or Purchase Order depending on step 2.
5.The Customer/Supplier and the Amount will be fetched automatically.
6.Select a Bank and the Bank Account.
7.Enter a Bank Guarantee number and name of the beneficiary.
8.Save and Submit.
In other words, the bank pays the loan if the debtor is unable to do so. A bank guarantee gives the client, or debtor, the ability to obtain products, purchase machinery, or obtain loans, so increasing company activity.
You can track Bank Guarantees provided to Suppliers and received from Customers using this document. To remind yourself to receive the bank guarantee back from your client as the expiration date draws near, you can create email alerts.
1.1 Additional Options when creating a Bank Guarantee
Margin Money: This sum represents a portion of the funds given to the Bank in order to proceed with the Bank Guarantee.
Charges Incurred: handling fees that the Bank levies.
Fixed Deposit Number: The giving party may use any fixed deposits they may have to proceed with the Bank Guarantee.