About bank guarantee
A bank guarantee is the bank’s obligation to pay the beneficiary of the guarantee the amount specified in the letter of guarantee, if the guaranteed obligation is not fulfilled.
The bank provides only financial security in a guarantee transaction – if contractual obligations are not met, the beneficiary of the guarantee will receive its money, but the bank will not interfere with the execution of the agreement as bank guarantee is not legally bound by the purchase and sale agreement.
The claims submitted under a letter of guarantee are paid by the bank on the beneficiary's request without requiring proof of the violation.
Apart from minimizing the risk of agreement unfulfillment, the service helps to improve mutual trust between business partners.
We issue guarantees in accordance with the international rules URDG 758.
Types of guarantee
Tender guarantee (bid bond)
The bank undertakes to pay the guarantee amount for contracting authority (organizer of procurement) if the tenderer withdraws their bid and/or will not enter a on the offered terms
Performance guarantee
The bank undertakes to pay the guarantee amount for buyer of goods or services if seller fails to fulfil its obligations, e.g. to dispatch goods
Advance repayment guarantee
The bank undertakes to pay the guarantee amount for buyer who makes advance payments for goods or services if seller defaults on delivery
Payment guarantee
The bank undertakes to pay the guarantee amount for seller of goods or services if buyer fails to pay for delivered goods or services
Warranty guarantee
The bank undertakes to pay the guarantee amount for buyer of goods or services if seller defaults on warranty obligations
How does bank guarantee work?
- In a purchase and sale agreement, it is agreed that the buyer’s payment obligation is secured with the buyer’s bank guarantee.
- The buyer applies for issuing a guarantee in favour of the seller and the buyers bank issues it.
- After dispatching the goods as agreed, the seller submits the required documents to the buyer and asks them for payment.
- If the buyer pays to the seller as agreed, the guarantee expires unapplied.If the buyer does not pay, the seller submits a claim to the bank to request the settlement of the unpaid amount under the letter of guarantee.
- The buyer’s bank pays the requested amount to the seller.
- The buyer’s bank informs the buyer of the claim and the buyer will pay the requested amount to their bank.
Guarantee fees applicable to stand-by letters of credit!
| Guarantees and sureties | Charge |
|---|---|
| Guarantee (SEB Bank's standard letter of guarantee text)1 or surety issuance | 0.5 % of the guarantee amount (min. EUR 100)2 and 30 EUR, if paper application is submitted |
| Guarantee issuance (non-standard letter of guarantee text) | 0.6 % of the guarantee amount (min. EUR 150)2 and 30 EUR, if paper application is submitted |
| Other fees related to guaranties and sureties | Charge |
| Guarantee (surety) issuance at a request of another bank | By agreement, min. EUR 300 plus commitment fee |
| Change to a guarantee (surety) terms at a request of another bank | By agreement, min. EUR 100.00 |
| Urgent delivery of guarantee / amendment of guarantee3 | Guarantee delivery / amendment fee plus min EUR 150 |
| Change to guarantee (surety) terms and conditions, including a reduction of a relevant amount | EUR 70 and 30 EUR, if paper application is submitted |
| Advice of guarantee (surety) or of its amendment | By agreement, min. EUR 45.00 |
| Cancellation of the request to issue a guarantee (surety) | EUR 45 |
| Handling of request for payment under the guarantee (surety) | 0.1 %, min. EUR 190 |
| Confirmation of signature of the person who signed request for payment and / or dispatch of request for payment under the guarantee | By agreement, min. EUR 60 |
| Sending an enquiry or preparing information about the guarantees granted and / or received (changes thereto) at the client's request | By agreement, min. EUR 45 |
| Drafting of the guarantee or deal structure | By agreement, min. EUR 45 |
| Dispatch of documents abroad by courier | EUR 55 |
| Dispatch of documents in Lithuania by courier | EUR 20 |
1 SEB bank’s standard-text letters of guarantee are available at www.seb.lt.If funds are not deposited, an agreed commitment fee is applied.
2 If the funds are deposited, a fee shall be applied for the balance of funds in the accounts as indicated in Price list of SEB bank’s services and transactions for business customers
3 Urgent delivery of a guarantee / amendment of a guarantee is performed within one business day since the moment in time when relevant request, correctly filled out and duly signed, is submitted to our bank. When filing a request, any and all terms and conditions of Guarantee Issuance Agreement must be met.
Required documents:
Simple to apply
Register for consultation
We will contact and advise you
Send the filled application to info@seb.lt
After a positive decision, sign the agreement
Cooperation with Ilte
In cooperation with Ilte we offer the option to get additional collateral (guarantee) to companies that need to increase the access to financing solutions.
Other options to finance your trade
Factoring
Change your invoices into cash flow. Offer extended payment terms to your clients, without reducing your working capital or sales volume.
Letter of Credit
For companies active in worldwide trading:
- For importers it minimizes the risk of wrong deliveries since the bank only pays if the seller shows the agreed documents.
- For exporters it secures the payment from the buyer.
Documentary Collection
A payment form which a Seller/Buyer can use to strengthen its position in a trading transaction.
Want to make sure you find a suitable solution?
- Our client executives will help you find the suitable financing solution for your business
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