Financial Bank Guarantee is a bond which is not cancelable and ensures the payment of the interest and repayment of the principal amount as per the schedule agreed upon by both the borrower and the lender. A guarantor to this debt security is liable to pay off the liability in case the first party or the issuer of the Financial Bank Guarantee fails to make the payment.
2) Performance Bank Guarantee:
The seller issues a Performance Bank Guarantee to ensure or give concrete commitment to the buyer through its bank. This method ensures the buyer the timely execution of an agreement to have the goods exported or delivered or services performed. In case the seller defaults on execution of the terms agreed upon the Performance Bank Guarantee ensures the buyer the payment of the guarantee amount by the issuing bank. Generally the performance Bank guarantee is 10 percent of the total assignment or project value.
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