Bankers Guarantee

Types of Bankers Guarantees

Tender Guarantee
A payment out of the total contract (5 10 %)
if the accepting party withdraws in the middle
of the process.
Replacement for the non refundable charge

Bankers performance Guarantee

A payment of the total (20 25%) if any party
do not performed as agreed

Advance payment Guarantee

A partial payment from future payments to be
made

Whats this ..,

A bank acts as an intermediate to create
the trust between two parties
The bank will guaranty a certain amount of
a payment on behalf of the other party to
be paid incase of an emergency
Will create trust and security regarding the
business and the partners

Why prefer guarantees by suppliers

local bank
Will deal in familiar territory in case of a
misconduct
Feel secure with a local entity than a
foreign entity
Can negotiate terms according to their
favor

Other guarantee types

Indemnities securing the release of goods
A guarantee upon damages and defects.
Will released when Bill of Lading for the
balances handed over to the shipping
company
Short term
Will not contain a value due to inability to
forecast a figure when signes

 Guarantee in support of loan or overdraft

which taken to
Provide working capital for a subsidiary
overseas
Provide funds to support staff temporarily
seconded to an overseas country
Fund the local costs incurred in the buyers
country
Ex / to pay wages to the labors hired from the
buyers country

Over draft or loan request should

submit with proves of
A cash flow forecast
Level of expertise the org. have to achieve
the desired objective
Results of any preliminary market
research regarding risks
The spread of markets to be explored
Results on preliminary enquiries on the
period of credit likely to be required in
overseas markets

 Details of the proposed contract, buyers,

amounts, credit terms, etc.
Confirmation on no constraints in capacity,
technology, etc. to fulfill the agreement
accordingly
Proposed payment method with buyers
reaction
A cash flow forecast if it is to cover a
series of contracts

Credit Insurance
Credit Insurance or Trade Credit Insurance
is an insurance policy and risk management
product that covers the payment risk resulting
from the delivery of goods or services.
Credit insurance usually covers a portfolio of
buyers and pays an agreed percentage of an
invoice or receivable that remains unpaid as
a result of protracted default, insolvency or
bankruptcy.
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Credit Insurance
Trade Credit Insurance is purchased by
business entities to insure their accounts
receivable from loss due to the insolvency
of the debtors. This product is not available
to private individuals.
The costs (called a "premium") for this are
usually charged monthly, and are calculated
as a percentage of sales of that month or as
a percentage of all outstanding receivables.
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Credit Insurance
Credit insurance insures the payment risk of
companies, not of private individuals.
Policy holders require a credit limit on each
of their buyers for the sales to that buyer to
be insured.
The premium rate is usually low and reflects
the average credit risk of the insured
portfolio of buyers.
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Credit Insurance
In addition, credit insurance can also cover
single transactions or trade with only one
buyer.
The exporters facing those problems may
be in a position to obtain insurance against
both the country and buyer risks.

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Credit Insurance
Credit insurance is totally different from
normal commercial insurance covering risks
to which the goods are exposed to in transits
Holding of credit insurance
Give the peace of mind to the insured
It can enable the exporter to compete more
successfully
The policy assist an exporter in obtaining finance
for sales abroad
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Institutions Providing Credit

Insurance Cover
Export Credit Guarantee Department
(ECGD)
NCM

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Other sources of finance

Export houses
Export Houses act as intermediaries between
the potential buyer and the prospective seller
who are possibly unknown to each other.
They offer a range of useful trade services.
Export Houses include merchants and traders,
export managers, export buying houses and
confirming houses

 Export finance houses

Intermediates who helps to make intermediate
payments

International credit unions

Joint ventures
Royalty agreements and licensing

Forfeiting
In forfeiting, a bank advances cash to an
exporter against invoices or promissory
notes guaranteed by the importer's bank.
The amount advanced is always 'without
recourse' to the exporter, and is less than
the invoice or note amount as it is
discounted by the bank. The discount
rates depends on the terms of the
invoice/note and the level of the
associated risk.

Factoring
The selling of a company's accounts
receivable, at a discount, to a factor, who
then assumes the credit risk of the
account debtors and receives cash as the
debtors settle their accounts.
Also called accounts receivable financing.