A bank guarantee (BG) is a promise from a bank that the liabilities of a debtor will be met. If the debtor fails to settle a debt or fulfill contractual obligations, the bank covers the shortfall. It is commonly used in business transactions, government contracts, and international trade.
Types include performance guarantee (ensuring contract completion), financial guarantee (ensuring payment), advance payment guarantee, and bid bond guarantee. Banks charge a guarantee commission (0.5-2% per year) plus margin money (10-25% of the guarantee amount) as security.
Bank guarantees are a form of non-fund based working capital, meaning no actual funds are disbursed. They facilitate business transactions by providing confidence to counterparties.
Bank guarantees enable businesses to participate in tenders, contracts, and transactions that require financial credibility assurance without upfront capital deployment.
Nihal Fintech helps businesses obtain bank guarantees through banking partners for tenders, contracts, and trade transactions, facilitating business growth and credibility.
Monthly EMI: --
Total Interest Payable: --
Total Payment (Principal + Interest): --
