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In terms of purpose, there are performance guarantees, which secure various performance obligations such as execution of works and/or contractual obligations, elimination of defects during the warranty period, delivery of goods or contractual obligations covered by advance payment etc., and payment guarantees that secure a payment obligation which may arise on the basis of a sale of goods/services, payment of lease or rent, settling customs obligations etc.
Depending on your role in a guarantee business – the role of the applicant or the beneficiary of the guarantee, we distinguish nostro guarantees, in which the bank guarantees payment to the beneficiary of the guarantee for you as the applicant, in case of non-fulfilment of your obligation specified in the guarantee, and in the opposite case, when you are the role of the beneficiary of the guarantee, loro guarantees issued in your favour, through your partner’s bank, as security for fulfilment of contracted terms and conditions.
The guarantor bank may issue a guarantee directly in favour of the beneficiary (regardless of whether it was forwarded through the bank of the beneficiary or not), whereas an indirect guarantees stands for issuing of a counter-guarantee in favour of the second bank that issues the guarantee to the final beneficiary.
Guarantee
A guarantee is a security instrument in domestic and international business whereby a bank guarantees to the beneficiary that it will, if the principal debtor fails to fulfil his obligations, pay the amount covered by the guarantee. The beneficiary is certain that it will settle its claim, whereas the debtor is certain that the payment under the guarantee will be executed only according to the terms and conditions specified in the guarantee.
Benefits
- A reliable security instrument
The most frequently used and the most reliable security instrument providing a high level of protection against various risks in international trade and domestic business operations. - Adjustment to the requirements of a specific business
Secure a wide range of obligations arising from commercial contracts with your business partner, such as obligations related to payment of goods and/or services, advance payment, tender participation, performance of works, customs duty etc. In addition to standard types of guarantees, we can also offer you issuing of guarantees tailored to specific transactions. - The possibility to negotiate more favourable business conditions by using a guarantee
We can support your business through issuance of guarantees by demonstrating your financial capacity and your capacity to fulfil your contractual obligations. With a guarantee, avoid the use of your own working capital and thus improve your current liquidity. - Additional instruments
Besides various types of guarantees, we can also offer issuance of instruments such as Standby letter of credit, letter of intent, letter of recommendation, as well as expert advise on all instruments and aspects of guarantee business. - Guarantees and letters of intent related to business with EU funds
If you are interested in working with EU funds or wish to participate in public tenders published by the European Union, we can offer you our support through issuance of guarantees and letters of intent in accordance with specificity of an individual EU tender. - Faster, more efficient and simpler delivery of requirements
Delivery of requests for issuing guarantees and letters of intent using e-zaba - Providing expert advice and assistance
Years of experience and expertise in standard and complex transactions, our professional and trained staff and numerous awards in the field of trade finance vouch for a high quality of service. - International presence of UniCredit Group and a large correspondent banking network
Zagrebačka banka and UniCredit Group represent a strong partner that can support your international business.
Arrangement
A Standby letter of credit (SBLC) represents an obligation of the bank to pay to the Beneficiary the amout available under Standby letter of credit, but not upon presentation of commercial documents (as in case of letters of credit), but on the basis of a written statement by the Beneficiary that the Applicant did not fulfill its underline obligation (as in case of guarantees). The Standby letter ofcCredit is a security instrument, like a guarantee, and is frequently used instead of a bank guarantee, mostly in business with the U.S. and Canada.
You can download our guide Documentary and guarantee business.
The first step contacting your business Relationship Manager in order to define the possibility and conditions for issuing of a guarantee. If you do not have a Relationship Manager assigned, please contact us tradefinance@unicreditgroup.zaba.hr. For guarantee issuance you have to fill in the request (domestic and foreign), after what the Relationship Manager will contact you concerning the approval.
The customary international practice is for guarantees to be governed by the Uniform Rules (Uniform Rules for Demand Guarantees – URDG) issued by the International Chamber of Commerce in Paris. The rules currently valid are URDG 758, implemented since 1 July 2010.
Use
Given that a guarantee provides business partners in international and domestic business the security for execution of payment or other obligations, it reduces the risks of both parties, gives proof of the financial or business capacity, enables negotiation of more favourable terms and reduces the engagement of one’s own working capital.
We can provide you with the following services:
- advising (forwarding) of a guarantee
- checking the credit worthiness of the guarantor bank
- checking the authenticity of the guarantee, i.e., validity of the signatories
- expert opinion with respect to the content of the guarantee
- suggestions in relation to possible amendments to the guarantee
- forwarding of your potential demand for payment under the guarantee.