Bank guarantee to enforce the contract

What it is

A bank guarantee is a written obligation of the bank to pay a sum of money to the counterparty of its client if the latter fulfills his contractual obligations improperly or does not fulfill them at all. The participants of such a relationship are called:

  • The guarantor is the guaranteeing party, that is, the bank;
  • principal - the party for which the guarantee is issued;
  • beneficiary - the recipient of the guarantee.

The bank provides a guarantee to the principal on a reimbursable basis. In addition to the fee, in many cases, banks also require a pledge, a guarantee or a security deposit. However, some credit organizations (including Sberbank) offer such a product without collateral - usually for relatively small amounts.

Guarantees to enforce the contract are issued in different currencies, but most often in rubles. The warranty is limited, the terms are usually set from one month to three years.

Warranty may be provided on a traditional paper form or in electronic format.

When you need a guarantee

In Russia, guarantees for the enforcement of the contract are most often applied in the field of public procurement. Government agencies and municipal structures, in conducting auctions and tenders in accordance with the law, require the supplier to provide security.

One way to fulfill this condition is a bank guarantee. Ensuring contractual obligations by depositing money into the customer’s account (before the contract is executed) is less popular.

Many private companies, when conducting their tenders, also set a condition on whether the supplier has a bank guarantee or other security.

Requirements for the guarantee on ensuring the execution of state contracts

In order for a customer to accept a bank guarantee, it must meet certain requirements:

  1. To be issued by a financial organization from the list, which is posted on the website of the Ministry of Finance of the Russian Federation. This list is constantly updated.
  2. Warranty is included in a special registry. The document is placed in the EIS, the data are open. Exclusion of warranty for contracts containing state secrets. For them is a special closed registry.
  3. The warranty provided is irrevocable.
  4. The amount of the security is 5-30% of the initial contract value.
  5. The warranty for one calendar month is longer than the term of the contract. If the customer has to demand compensation from the guarantor, additional time will be required to receive it.
  6. The warranty must comply with other requirements specified in the notice of the public procurement.

How to get

The procedure for obtaining a guarantee is as follows:

  1. Examine the terms of the product in the selected financial institution on its website or from a consultant. You should make sure that the firm or company meets the requirements of the bank.
  2. To collect and submit to the bank a package of documents. They may need, in particular, a certificate of registration in the Unified State Register of Companies, financial statements, a draft contract and others.
  3. Wait for the decision of the bank. Usually the decision is made within a few days. However, in some banks scoring models for issuing guarantees for small amounts (up to several million rubles) are applied, and then the solution can be known on the same working day.
  4. Coordination of the draft guarantee and payment of the invoice issued by the bank.
  5. Getting a guarantee.
  6. The bank makes a guarantee in the register and issues the corresponding statement to the client.

There are quite a few companies on the market that offer assistance in obtaining this product. For a fee, credit and financial brokers help to select a guarantor bank and collect a package of documents. Such a partner should be chosen very carefully: there is a risk of running into fraudsters.

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