The Key Benefits of Performance Guarantees: Merchant Credit and Guarantee Corporation Limited

Are you in the process of entering into a trade or contract deal? If so, you should make yourself familiar with the terms Performance Guarantees and  Bank Guarantees. Performance Guarantees are issued by the bank to ensure a positive outcome of the contract or trade agreement. Performance Guarantees is a promise to a client by the bank or insurance company on behalf of the contractor to complete the work as per the agreement. Performance Guarantees gives confidence to the employer that contractor will meet the estimated deadlines and complete their contracts on time. The client is guaranteed to get compensation for any insolvency up to the amount mentioned in the performance bond if the contractor fails to meet the specifications as per the contract. It helps the sellers in trading goods. The buyer asks for the Bank Guarantees from the seller for their performances and if the seller fails to abide by the terms of the contract for supplying the goods, the buyer has the full right to claim for Bank Guarantees. 

Performance Guarantees are of two types on demand and conditional. For on-demand guarantees, the bank has to make the payment, whenever it is demanded. Conditional guarantees are paid only after the occurrence of any unexpected event. The key benefits of Performance Guarantees for contractors or sellers are it enhances liquidity, improves the ability to bid more, and opens more business opportunities by providing financial strength and guaranteeing a positive outcome. For buyers or owners, it gives assurance about the completion of the project even if the contractor is not able to meet their performance terms. They need not pay an additional amount for completion of work.

Bank Guarantees are an assurance by the bank to cover the debt in case the debtor fails to cover it. It helps the customer to expand his business by acquiring goods, buying equipments, or drawing down loans. It serves as the best tool for risk management for the beneficiary. Bank Guarantees reduce the financial risks involved in any business. The seller or beneficiaries can expand their business on a credit basis with the help of these Guarantees. It is beneficial for small-scale businesses as the bank generally charges low fees for guarantees which encourages the growth of business and enterprising activity. It helps to increase confidence in doing transactions. There are different types of Bank Guarantees via direct and indirect guarantees. Direct guarantees are used in international or domestic business and are issued directly to the beneficiary. Indirect guarantees are generally used in the export business mainly when the receiver of the guarantee are public entities or government agencies.

For more information visit our website: https://merchantcreditcorp.co/  

Merchant Credit and Guarantee Corporation Limited (MCG)

Phone: +64 9 5244269

Email:  info@merchantcreditcorp.co