1 / 6

Bank Guarantee vs. Letter of Credit: How do they differ?

The ability of a debtor to repay the other party, no matter the debtor's financial status, is guaranteed by both a letter of credit & bank guarantee issued by a financial institution.

dgftguru
Download Presentation

Bank Guarantee vs. Letter of Credit: How do they differ?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. BANK GUARANTEE VS. LETTER OF CREDIT HOW DO THEY DIFFER? www.dgftguru.com

  2. Bank Guarantee Compared to a letter of credit, bank guarantees are a far larger duty for banks to fulfill. The bank guarantee & a letter of credit guarantees the beneficiary's payment for a certain amount. The bank will pay the agreed-upon payment if the person fails to meet its contractual obligations. Buyers and sellers can utilize the guarantee as insurance against the party's failure. READ MORE

  3. LETTER OF CREDIT The letter of credit, often called "documentary credit," is a form of a financial guarantee offered by a financial organization in the form of a promissory note. Assures the lender or seller that they will get their money on schedule and in whole from the buyer. If the purchaser cannot make payments on the deal, the agreement guarantees that the bank will settle for the whole or outstanding balance. READ MORE

  4. EXCEPTIONS AND CAUTIONS A bank guarantee or letter of credit can be used to lessen the overall risk involved in a business transaction. A bank guarantee or letter of credit makes a transaction more appealing to both parties since they assume less risk. Such agreements are especially relevant and helpful in high-stakes business dealings, such as some real estate and global trade contracts. READ MORE

  5. Cautions Different people use letters of credit and bank guarantees. Consultants who bid on massive projects need bank guarantees—the contractor's ability to prove its financial stability through the provision of a bank guarantee. However, businesses that often import and export commodities need letters of credit. To encourage exports, many schemes that waive or reduce customs duties. The Advance Authorization Scheme is one example of a program that promotes exports. The Advance Authorization Scheme waives or reduces customs duties for exported products, thus providing an incentive for manufacturers to produce and export more goods.

  6. THANKS FOR WATCHING Feel free to contact us..! www.dgftguru.com

More Related