HOW TO GET LOAN AGAINST BANK GUARANTEE

HOW TO GET LOAN AGAINST BANK GUARANTEE

A bank guarantee is a lending organization's commitment to cover a loss their customer defaults on a debt to a 3rd party. In other words, if the debtor fails to settle a loan, the bank will cover them as debtor’s guarantee.

It can be helpful for companies to purchase raw material when the actual working capital limit is fully exhausted.

SIX BENEFITS OF BANK GUARANTEE

LOW FINANCIAL RISK

The requirement for bank guarantees emerged due to the high defaults by the purchasers. Merchants were not willing to supply products to obscure purchasers without getting the initial payments. This created mistrust and Bank guarantees unraveled this issue by going about as an assurer to the merchant, for example the recipient for our situation. The merchants, in the wake of acquiring bank guarantees, are prepared to supply merchandise. It cuts down their financial risk to a considerably low level.

HIGH OPPORTUNITIES

By having bank guarantees with itself, a business can get a handle on circumstances in the market which were prior not accessible to it. An open discernment would be built up that a bank remains with a specific business. Having a bank as an accomplice is dependably an indication of the high trust and confidence towards the business.

NOMINAL FEES

The service fee charged by the banks are nominal. It ranges from about 0.5% – 1% of the sum guaranteed by the bank. Because of its menial nature, the expenses don't significantly affect the benefits of the business.

NO NEED FOR ADVANCE PAYMENTS

Advance installments to the merchants have turned into a relic of times gone by. It implies that the purchaser can concede his money outflow to a later date. By deferring installments, the available assets can be used presently to fuel additional development.

HIGH CREDIBILITY

Banks practice broad credit checking. They have specific staff and Sources which can precisely evaluate the financial strength of a business. Subsequently, the credibility of the concern improves as it is upheld by the banks. The banker's trust would reflect that the performance of the business is very good and there is no danger of default.

LESS DOCUMENTATION

In a bank guarantee process, lesser documentation is required. Just the data about the concerned parties, the insights regarding the transaction about which guarantee is looked for, financials of the candidate are by and large requested by the banks. The level and degree of documentation may change depending upon the lender's policy and duration of credit.

TYPES OF BANK GUARANTEE • Performance Guarantee • Advance Payment Guarantee • Foreign Bank Guarantee • Bid Bond Guarantee • Financial Guarantee • Deferred Payment Guarantee

HOW TO AVAIL BANK GUARANTEE IN INDIA Banks in India provide bank guarantee in return for a service fee. Prior to issuing bank guarantee, the banker will initiate a diligence of the bank guarantee applier and may also request for collateral safety.

Here are some of the documents required by a bank to process a bank guarantee application: Request Letter and Counter Indemnity cum Memorandum relating to charge over fixed deposit duly stamped (Franking as per respective State Stamp Act) .

Bank Guarantee text.

Board Resolution for Private Limited Company / Limited Company Trusted financial institutions like Balaji Credit helps companies to avail funds and even raw material against un-utilized Bank Guarantee limits.