LEASED BANK GUARANTEE
A bank guarantee leased to a third party for a certain fee. The issuing bank will conduct a thorough background check on a potential client’s creditworthiness who is securing a bank guarantee. After conducting due diligence, the bank will give the guarantee to the customer at a predetermined amount of money and payment period, normally less than two years. The bank will deposit the guarantee to the borrower’s main bank; then it now acts as a backer for debts incurred by the customer up to the specified guaranteed amount.
Leased bank guarantees are expensive for the fees can go up to 15% of the guarantee amount yearly. Smaller enterprises who seek to expand its operations or fund their project(s) use this financial backing option.
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