What is an International Guarantee?
Instrument through which a financial entity acts as guarantor of commercial or financial commitments assumed by its Customer.
In this way, the bank irrevocably guarantees payment to the payee whenever the contractual conditions are not met.
DirectWhen your company instructs BBVA to issue the guarantee directly in favor of the payee. These guarantees can be issued on stamped paper from the bank or sent by SWIFT to the bank of the payee who notifies, with no liability or obligation on its part, except for the confirmation of the authenticity of the message.Indirect (Counter-guarantee)
When there is a second bank involved, that bank (guarantor), with residency in the payee's country, is represented by the bank of the payer (counter-guarantor) for issuing the bank guarantee. Its requirement and use is more frequent nowadays, specifically when the payees are government or public entities.
For security purposes, we recommend that you issue bank guarantees. Whichever bank guarantee you choose (direct or indirect), it must be issued and received via SWIFT, as this lets participating banks confirm their authenticity.
This subscription credit instrument has the following advantages:
- Speed in issuance.
- Facilitates and speeds up transactions as per the specific requirements of the exporter and/or importer.
- Offers security to the payee: if contractual obligations are not met by the payer, the guarantee can be executed.
- Offers confidence to the economic agents because there is a bank involved.
- Allows the payer to demonstrate its financial capacity and solvency to the payee and in many cases, it replaces the bond necessary to secure any particular international contract, thus avoiding the mobilization of resources or the use of higher cost financing.
- Facilitates bidding in public tenders.
Tender (Bid Bond)Used to submit a bid in tenders (ensures the non-withdrawal of tender, the non-waiver in case of award, and the delivery of the performance bond in case of award).Execution (Performance bond)Proper fulfillment of the contract (ensures compliance with contractual obligations for supplies or service provision) within the stipulated term and conditions.Repayment (Advance payment bond):Ensures the payee receives repayment in advance, if the ordering party does not comply with the terms of the contract.