Bank Guarantee Facility

Traditionally, Cash Credit and Overdrafts have been the go-to options for working capital. However the financial landscape has evolved, and so have banking solutions. Today, businesses have a plethora of options tailored to their specific needs. Among these, the Bank Guarantee has emerged as a powerful tool for fostering trust and streamlining operations.

Generally, working capital facilities can bifurcate into two segments. One is fund-based and the other is non-fund-based. However, a BG is a non-fund-based credit facility. It is an unsecured debt funding instrument. Terkar Capital arranges loans against the bank guarantee.

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Key Features of Bank Guarantee Facility

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Advantages of a Bank Guarantee Facility

Builds the confidence of performance in the transaction.
The issuing bank takes the assurance of the payment.
Safeguards the interest of both issuing and receiving parties.
Ease of doing the large value transaction.
Supports the oral commitment and integrity of the issuing party.

Steps of BG Backed Transactions

Whenever the buyer and seller need assurance on the payment and delivery of the product or service, a bank guarantees come into the picture. Below is the standard process followed for the BG-backed transaction.

The buyer/applicant approaches the bank to issue the BG to the seller. The applicant provides all the necessary inputs which include, the amount, date, validity period, the purpose of the issuance, etc.
Once the bank receives the required documents, it issues the bank guarantee to the seller. The bank may charge fees to the buyer/applicant. The bank will consider its mortgage/collateral before issuing the BG. If the requested amount is more than the bank’s comfort, the buyer/applicant may need to arrange for more security deposit.
Once the seller receives the BG from the Buyer, it confirms to the seller his assured payment. So the seller can start the execution of the order and delivery of the goods and services.
When the seller has performed all the terms and conditions of the payments, the buyer has to make the payment to the seller. In any case, if the buyer refrains from making the payment or delays the payment, then the BG issuing bank is liable to make the payment without question to the seller. And if the buyer makes the committed payment, then the bank guarantee stands void.

How Terkar Capital executes a bank guarantee process, Learn here.

Bank Guarantee Documents Required

To obtain a BG Facility in India, applicants typically need to submit a duly filled application form along with

KYC documents, business registration papers, and a board resolution for corporate entities.
Financial statements, collateral documents (if applicable), and details of the transaction are also crucial.
Legal opinions may be sought, and an application fee is usually charged by the issuing bank.

Applicants should check with the specific bank for any additional requirements and follow their guidelines for a smooth application process.

Bank Guarantee Facility at Terkar Capital

Regarding the bank guarantee, multiple banks provide BG issuance and discounting facilities. The buyer or seller may be confused about which one to opt for.

Terkar Capital provides loans against bank guarantee. We understand the role of the BG Facility in India from both sides, from the buyer side and the seller side. It is not only limited to the issuance of the bank guarantee but also to the discounting of the guarantee. We make sure that our professional execution helps all the parties (Bank, buyer, and seller) to complete the transaction without any hassle.

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FAQs On Bank Guarantee Facility

We are building our reputation through reliability, integrity, and honesty. We connect to our clients on personal grounds that include transparency and liability.

Generally, you can expect the process to take anywhere from a few days to several weeks.

A Bank Guarantee can generally not be revoked unilaterally. However, there might be provisions for amendment or cancellation under specific circumstances.

If a valid claim is made, the bank will pay the beneficiary the guaranteed amount. The bank then recovers the amount from you.

We Facilitate the Following Funding Instruments

Client Testimonial

We have had a smooth experience with all our capital arrangements facilitated via Terkar Capital so far. Its very comforting to work with people as professional and straightforward as Vishal and the rest of his team. Thanks for everything.

Nrip Nihalani

A very professional and systematic approach towards work would definitely recommend Terkar capital to colleagues and friends.

sunil bodwade

Professionally managed the complete process, right from understanding Business and it's funding requirements upto banking products to choose and go for. Thanks Team.