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Understanding Bank Guarantees: Everything You Need to Know - Series 1

A business like an infrastructure contract business usually requires a good Experience promoter. To manage in terms of employees, sub-contractors, having some decent working capital to run a company and maintain a reputation in the industry are basic DNA.

The second step is to have a good contact with Large Corporates and Government who offers a Large Projects through online /offline Tender. Hence, reviewing tender requirements like purpose of assignment, budgeting, costing and participating in tender and winning a deal or making a JV to participate with a leading firm to win the deal.

The winning bid may require a Tender Deposit /Tender Guarantee etc.,

There are 2 ways a promoter needs to review and manage his financials.

1) short-term financial planning to manage day-to-day activity

2) Long-term financial planning involves large investments like assets, acquisition of assets, machinery etc.,

3) Managing Financial and Guarantee Instruments is challenging to manage, with the following example :

A Tender Guarantee - The first step of requirement with an example of INR 5 Crores

First Stage : - Existing Banking Relationship & working capital

Request existing bank to issue a Guarantee (Tender / Bank ) usually deduct 20% to 40% of the funds from the working capital and issue these instruments (example INR 1 to INR 2 Cr) resulted the comapny's existing working capital is reduced ? IF you want to avoid the working capital block, then choose the Alternate Option.

Alternate Option 1

Fee-Based Guarantee Instruments - without blocking the working capital funds :

Most international and foreign banks can issue a Bank Guarantee (performance Bond) to offer each time based on business needs and cover the following points : (Indian banking system accepted foreign banks' participation and can refer the RBI Source:

  • Payment Guarantee

  • Performance Bank Guarantee

  • Retention Guarantee

All these kinds of guarantee issued on the basis of reviewing the business contract, MOU, tenure etc., and client can apply through Digital online method when the client become Approved Client of a Bank

What is the Advantage of an Approved Client of a Bank and Indicative fee?

It is very simple, the important and mandatory process required a Bank to review the financials, KYC, of the Individual Promoter, Compnay information etc., are mandatory check.

When a Bank wants to onboard a client and extend a credit facility under a Non-Collateral - (Non-Fund based Program) the following are applied :

1) Documentation and reviewing KYC and Onboarding in Banking system

2) Bank will review the client information, KYC information and auto approve (system based in principal approval etc.,)

3) if the bank auto approved and client get Approved confirmation directly from the bank -(bank will send communication directly to client make Non-Refundable KCY Verification fee)

4) with in 5 to 7 business days the client get a confirmation on the KYC Verified and approved client of Bank

5) This is life time benefit for the business function like Infrastructure business, Importers, Exporters across 156 countries

The approved client can apply for the following Non-Collateral - Non-Fund Based Services of the following

  • Tender Guarantee

  • Performance Bond

  • Bank Guarantee

  • Advance Payment Guarantee

  • Performance Bank Guarantee

  • Retention Guarantee

Moreover, the following International Trade Guarantee Instruments Too :

Letter of Credit - Stage 1 - with a Validity of 180 days ( can be issued /advised by HSBC, CITI etc., from USD 1 Mn to 20 Mn

Letter of Credit - Stage 2 - with a validity of 180 days can be issued from USD 0.50 Mn to USD 50 Mn

SBLC - with a validity of 365+1day can be issued from 0.50 Mn to USD 50 Mn

Bank Guarantee - can be applied from USD 0.50 Mn to 50 Mn

Performance Bond - can be applied from USD 0.50 Mn to 50 Mn

Important points for business promoters:

All the required fees are directly payable as per the Bank Invoice.

The current market trend operates through un-known brokers, un-registered financial consultants, collecting advance from clients and run-away - To ensure the awareness of the borrower to read, check, then apply to move forward.


Book Online for cost effective Non-Fund based & Fund based project finance - Non collateral Business Loans etc.,

We encourage brokers and financial advisors not to be in global business. You can refer your clients to these kinds of products, because in most situations the financial broker has limited information but has access to clients and can also earn some referral fee from us.

Bank Guarantee - International Business
Bank Guarantee


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