A Letter of Guarantee issued by the bank whereby the bank undertakes to pay an agreed sum to the beneficiary of the guarantee if the applicant fails to fulfil his obligations under the terms and conditions of a contract with the beneficiary.
Guarantees can be issued for various purposes. The main types are:
- Tender / Bid Guarantee
- Performance Guarantee
- Advance Payment Guarantee
- Security Deposit Guarantee
Tender / Bid Guarantee
Guarantee issued in support of a tender for contract wherein a company that participates in a tender must submit its offer with a Bid Bond. The bank undertakes to pay the guaranteed amount if called upon by the beneficiary of the guarantee. These guarantees are usually short term.
Guarantee issued to assure the beneficiary the guaranteed amount if the contractor (applicant) fails to fulfil his obligations under the contract. Usually, the performance bond is for about 10% of the contract value. These guarantees are usually valid until the completion of the contract and may come with warranty period after completion.
Advance Payment Guarantee
Guarantee issued to cover advances made by the beneficiary to the applicant in which if the applicant fails to perform under the contract, such advances made earlier will be refunded.
Security Deposit Guarantee
Guarantee issued in support of payment in lieu of cash deposits by the applicant to cover payment such as to Tenaga Nasional, Telekoms, Customs, etc to cover payments for the purchase of goods, services and/or supplies.
Where can I get more information?
Call our Trade Finance Centre at:
Kuala Lumpur (6) 03-2178 5000
Penang (6) 04-323 3949
Johor (6) 07-386 7597