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 (organiser 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
State Revenue Service guarantee
The bank undertakes to pay the guarantee amount for Customs debt guarantee and Excise tax debt guarantee
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.
| Service | Fee |
|---|---|
| Guarantee line1 | |
| Processing of the Guarantee line/its amendments | By agreement |
| Guarantees/International guarantees/Stand-by letters of credit | |
| Issuance of Guarantee/Stand-by letter of credit: | |
|
100.00 EUR |
|
By agreement, min 70.00 EUR |
|
By agreement, min 190.00 EUR |
| Extra commissions charged for issuance of a Guarantee/Stand-by letter of credit: | |
|
90.00 EUR |
|
By agreement, min 70.00 EUR |
| Guarantee utilisation fee (depending on the type of collateral): | |
|
Min 1% per year, min 70.00 EUR3 |
|
By agreement, min 70.00 EUR |
| Amendment/cancellation of a Guarantee | 70.00 EUR |
| Notification of a Guarantee/Stand-by letter of credit issued by another bank | 85.00 EUR |
| Notification changes to a Guarantee/Stand-by letter of credit issued by another bank | 70.00 EUR |
| Verification of the authenticity/cancellation/processing of other information of a Guarantee issued by another bank upon the customer’s request in case SEB bank is not the advising bank | 100.00 EUR |
| Processing/certifying the signatures/forwarding the claim on behalf of the customer4 | 0,2%, min 145.00 EUR |
| Payment of a received claim | 0,25%, min 145.00 EUR |
| Confirmations | |
| Confirmation of issuance of a guarantee | 70.00 EUR |
| A certificate of the possible issuance of a guarantee | 30.00 EUR |
| Changes to the provisions of the confirmation at the customer's request | 30.00 EUR |
| Additional services | |
| Processing and forwarding information of financial transactions on behalf of the customer | 30.00 EUR |
| Preparation of agreement and collateral agreements in electronic format | Free of charge |
| Preparation of agreement and collateral agreements in paper format | 35.00 EUR |
| Authorisation to receive goods addressed to the bank | 70.00 EUR |
| Costs of courier services | Actual costs |
| Commissions charged by correspondent and cooperation banks | Actual costs |
| Verification of counterparties involved into deal (applicable for deals with high risk countries)* | 45.00 EUR |
* In accordance with the bank’s related internal and external regulations at the moment of verification.
1 The commission fee must be paid on the day the agreement or amendments are signed.
2 Subject to the decision made by SEB bank and concluding the relevant agreement with the customer. The standard term for issuing a Guarantee is laid down in the Terms and Conditions of the Guarantee.
3 Account balance fee shall be applied for the balance of funds in the accounts as indicated in SEB bank’s General Price list for Corporate Customers.
4 Application for processing and sending a claim should be submitted to SEB bank at least 3 business days prior to the Guarantee expiry date.
Required documents:
- Filled application
- Agreement (guarantee of performance) or invoices (guarantee of payment) concerning which the issuing of a letter of guarantee is being sought
- Latest annual report and interim report on current financial year
- A valuation report if a property is offered as collateral
- If you are not a customer of SEB, account opening is needed
Simple to apply
Cooperation with Altum
In cooperation with Altum 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
- We have a dedicated team of professionals you can trust
