Bank Guarantee (BG) Guidance
A bank's assurance that helps your business secure contracts and build trust.
Overview
A bank guarantee is a commitment by a bank to pay a beneficiary if the applicant fails to fulfil contractual obligations. It is commonly used for tenders, supply contracts, and performance assurance.
Key considerations
- Business with contracts or tenders
- Banking relationship
- Collateral or margin money
- Acceptable credit profile
Typical eligibility
These are indicative criteria. Actual requirements vary by lender.
- Business with contracts or tenders
- Banking relationship
- Collateral or margin money
- Acceptable credit profile
Typical documents
Document requirements vary by lender and loan type.
- Business registration
- Bank statements
- Contract/tender document
- Financial statements
Frequently asked questions
What is the difference between LC and BG?
An LC is a payment mechanism (the bank pays the seller), while a BG is a guarantee (the bank pays if the applicant defaults). Both are trade finance instruments.
What collateral is needed for a BG?
Banks typically require margin money (10–100%) and/or collateral. Requirements vary by bank, BG type, and applicant profile.
Your next step
Ready to explore Bank Guarantee?
Share your requirement and a SMFINCARE financing specialist will help you understand what to prepare.
This assessment is indicative and educational. It does not constitute a sanction, approval, credit decision or guarantee. Final eligibility, interest rate, loan amount, documentation and disbursement are determined by the relevant lender according to its policies and applicable law.