In the Indian traditional working capital format, Cash Credit (CC) and Overdraft ( OD) are the most famous and commonly known working capital facilities. However, over the period, the banking industry has developed many products. They have designed considering the characteristics of the nature of the businesses. Few of them are developed to build trust between buyer and seller. So, among the financial instruments, a bank guarantee facility has gained prominence.
Generally, working capital facilities can bifurcate into two segments. One is fund-based and the other is non-fund-based. However, a Bank Guarantee is a non-fund-based credit facility. It is an unsecured debt funding instrument. Terkar Capital arranges loans against the bank guarantee.
An affordable method for payment guarantee
Issued by a bank with Good Credit
Bank's Guarantee of payment to third-party
Mitigate risks for both the Buyer and the Seller
It can be Revocable or Irrevocable
To obtain a bank guarantee 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.
Whenever the buyer and seller need assurance on the payment and delivery of the product or service 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 bank guarantee 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.
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 bank guarantee 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.
We cordially track the deadlines and make our quality tangible, while executing finance projects well ahead of time.
We comply with the highest professional confidentiality standards. All client information is discussed in strict confidentiality.
We find you the right lenders with similar terms and the lowest rate of interest.
We create a stable ownership structure for financiers by establishing a secure transaction process.
We are building our reputation through reliability, integrity, and honesty. We connect to our clients on personal grounds that include transparency and liability.
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