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A form of guarantee given by the bank to facilitate clients carrying out business transactions without delay
A buyer may seek an assurance that a supplier can perform a specific supply contract and may seek a Bond confirmation from the Bank. These endorsements on the part of the Bank serve as a method of confirming the sound financial standing of a company, as well as its ability to honour its obligations.
The Performance Bond is issued for a percentage of the contract (usually 10%) With the Bid Bond the Bank endorses a company bidding for a specific project.
A Bid Bond is also issued for a percentage of the project (usually 5%)
This instrument is less rigorous than a Letter of Credit; this instrument is negotiated between an importer and a Bank. The Letter of Guarantee confirms to the supplier that payment will be made once the pre - agreed supply terms have been satisfied. This eliminates credit and payment risks for the supplier.