A bank guarantee is an irrevocable commitment undertaken by a bank (guarantor) in favor of a party, referred to as beneficiary, to pay to it an amount of money, should another party, referred to as debtor, upon the request of which the bank guarantee is issued, fail to meet certain liabilities towards the beneficiary, assumed under a commercial or other kind of contract (object of the guarantee).
Moldova Agroindbank issues guarantees in MDL and foreign currency, both internal (the beneficiary and the debtor are residents) and external (the beneficiary and/or the debtor are non-residents).
The main kinds of guarantees issued by the bank are as follows:
- Payment Guarantee is issued to coverthe debtor’s obligations to pay a certain amount of money under a commercial contract;
- Bid Bondwhich ensures that the seller shall not withdraw its bid after the buyer accepts the bid’s conditions. It allows the seller to avoid spending cash and time to call for new bids and examine them;
- Performance Bondensures the fulfillment of contractual obligations in line with the contract’s conditions and terms;
- Advance payment guaranteewarrants that the amount paid in advance by the buyer will be paid back if the seller fails to meet contractual obligations;
- Customs guarantee is issued in favor of the Customs Department. The list of commodities for which the deadline for the payment of the VAT on import may be extended is set by the law on state budget;
- Credit insurance guarantee warrantsthe debtor’s payment obligations towards the creditor provided for in a loan agreement;
- Guarantee/counter guarantee. Moldova-Agroindbank may step in as intermediary, should the beneficiary demand that a guarantee be issued by a foreign first rank bank. In this case, Moldova-Agroindbank issues a counter guarantee in favor of that bank.
Advantages for customers:
- Possibility to postpone payments under contractual obligations and/or the possibility to finance production without using their own working capital;
- Proves the debtor’s capacity to meet his/her contractual obligations as the bank issues guarantees on condition that it will check the debtor’s solvency;
- Possibility to bid without withdrawing their own capital from circulation;
- Lower costs than the ones for a bank credit.