- August 30, 2021
- Posted by: admin
- Categories: Banks, Blog
Business partners use bank guarantees to ensure that the security of transactions transacted in the business. What you need to know about bank guarantee in UAE is an important question that you have to know. If the contractor fails to fulfill the terms of the contract, along with these documents the bank accepts the responsibility to pay a listed amount to the customer. If you are looking to getting a bank guarantee in UAE then the Taskmaster professionals will help you in this process.
A bank guarantee is a guarantee given by the bank or financial institutes to a creditor for a borrower. It is an agreement between three parties – bank, lender, and borrower. When the lender gives a product or loan to a borrower, the bank or financial entity guarantees to the lender that, if the borrower gets fails to repay the loan amount, then the bank would suffer the loss.
Process of a Bank Guarantee in UAE
A Bank guarantee contract typically takes place between small- and large-scale businesses. The large-scale companies request a bank guarantee while cooperating with small-scale businesses. the bank guarantees generally there in infrastructure and real estate companies.
For instance, if the owner of a restaurant requires certain kitchen equipment, the vendor of equipment requests for a bank guarantee in UAE from the owner of the restaurant prior to delivering the commodities as they hazard their business in case of any loss. The owner of the restaurant would visit the bank and approach for a bank guarantee in UAE. banks do not give such assurance without the verification of personal information. They examine the financial sustainability, creditworthiness with other eligibility criteria prior to giving the guarantee.
After the completion of the verification procedure after the viewing again the submitted documents by the borrower, the bank gives the guarantee that can be utilized by the vendor.
Parties to the Bank Guarantee in UAE
The services of bank guarantee in UAE are lucrative as it minimizes the potential hazards of transactions and ensures the complete discharge of guidelines mentioned in the agreement. The sides of a bank guarantee are as follows –
- Beneficiary : The legal or natural person who requests payment and who accepts the amount of payment from the bank.
- Principal : Originator of issuance of bank guarantee
- Guarantor : Any financial institute that, upon receipt of a request for payment immediately accepts responsibility for making payment to the person specified in the agreement. A Bank guarantee is helpful and profitable for the owner of the business but also for the banks. Unlike loans, they do not need immediate monetary coverage. In addition, such payment on the guarantee may be delayed for a certain duration. Commission fees may charge mandatorily and in full for the provision of such guarantees.
Types of Bank Guarantee in UAE
Bank guarantee in UAE is different based on the characteristics of the transactions, are:
- Payment Guarantee : This kind of band guarantee makes sure the payment is on time for the commodities delivered or services rendered.
- Tender Guarantee : This kind makes sure the completion of payment needs if the successful tenderer refuses collaboration such as cancellation of application, non-signing of contract, and more.
- Tax and Customs Guarantee : This kind of guarantee make sure the performance of obligations to the tax and customs official in the United Arab Emirates.
- Advance Payment Guarantee : This kind of bank guarantee makes sure the refund of the advance payment if the terms and conditions of the transaction are not met with respect to time and quantity.
- Performance Guarantee : This kind of bank guarantee provides a guarantee for the delivery of all kinds of services, works, or goods delivery which are performed in a complete and timely manner.
- Conditional and Unconditional Guarantee : A Bank guarantee can be classified into conditional & unconditional guarantees, subject to the conditions of monetary payment. A conditional guarantee can be termed as a payment made on the beneficiary’s written request and the availability of documents confirming the completion of responsibilities by the principal. In the situation of unconditional guarantee, access to a beneficiary’s written request is sufficient to pay.
- Secured and Unsecured Guarantee : In addition, bank guarantees can also be secured and unsecured. There guarantee is unprotected if there is a written commitment. A bank guarantee is considered safe if there is some other method of making sure it such as mortgaging an asset.
Document Required for Bank Guarantee in UAE
The necessary document required for a bank guarantee in UAE are:
- Emirates ID
- Residence visa and valid passport
- Business license
- Commercial registration certificate
- Free zone incorporation certificate
- Memorandum of Association
- Partnership contract
- Power of attorney
- Proof of address
- Audited financial statement
If you want to get a bank guarantee in UAE then, above we mentioned some important things that will surely helpful for you. You can get in touch with the Taskmaster professional who will help you get a bank guarantee on your behalf.
Also read, What Is Bank Guarantee And How Does It Work?