KBC’s international bank guarantees
If you are self-employed and doing business in other countries, an international bank guarantee prove to be very useful. KBC offers the following international bank guarantees:
- Payment bonds
- Performance bonds
- Bid bonds
- Advance repayment bonds.
We’d like to tell you a bit more about these four products.
A. Payment bonds
The payment bond guarantees the supplier that payment will be made within the specified period and for the amount invoiced.
- For one-off contracts, a guarantee equal to 100% of the contract amount is mostly provided, but the amount can also vary according to the payment tranche to be covered.
- For continuous supply contracts, the guarantee is provided for the amount of the average outstanding balance for a particular delivery period (the amount has to be estimated).
The guarantee normally applies from the date the contract commences and lasts until the end of the payment obligations arising from the commercial contract. The guarantee can, however, also be extended if the delivery schedule in the contract is amended by mutual agreement.
B. Performance bonds
The performance bond enables you to guarantee the beneficiary that you will perform the contract correctly (within the agreed term and according to the contract terms). If you fail to meet those obligations, or only do so imperfectly, the beneficiary can have the contract completed by a third party.
Usually 10% of the contract amount. In principle, this amount is fixed for the entire duration.
From the date the contract commences and, usually, lasts until the deliveries are completed, as specified in the commercial contract. In most cases, however, additional confirmation of release by the beneficiary is required.
Extensions might be required if the delivery schedule is amended by mutual agreement between you and the buyer.
C. Bid bonds
The bid bond means that the tenderer will be compensated if you:
- Withdraw your quotation before the tendering period ends
- Fail to sign the commercial contract
- Fail to issue the further guarantees required with respect to the repayment of the advance and/or the performance of the contract
Usually 1% to 5% (in unusual cases even 10%) of the quoted price. That amount remains the same until the expiry date or until the bond is released.
The bond runs from the date of deposit until the tender date specified in the contract, plus a period (mostly 30 days) for the signing and return of the allocated contract.
D. Advance repayment bonds
The advance repayment bond guarantees the buyer that it can claim back its advances if you do not perform the commercial contract properly.
The amount of this bond generally matches that of the advance. It usually comprises 15% of the contract amount.
The advance repayment bond runs from the date the advance is paid into your account until the expiry date specified in the contract. Extensions might be required if the delivery schedule is amended by mutual agreement.