what is a bank guarantee 
a bank guarantee is a financial backstop offered by a financial institution promising to cover a financial obligation if one party in a transaction fails to hold up their end of a contract generally used outside the united states a bank guarantee enables the bank s client to acquire goods buy equipment or perform international trade if the client fails to settle a debt or deliver promised goods the bank will cover it investopedia joules garciaunderstanding bank guaranteesa bank guarantee is a promise by a lending institution to cover a loss if a business transaction doesn t unfold as planned the buyer receives compensation if a party doesn t deliver goods or services as agreed or fulfill contractual obligations 1non u s financial institutions and intermediaries in countries such as spain the u k and elsewhere may more heavily rely on bank guarantees in commercial transactions but sometimes a bank guarantee may help an individual rent a property 2a bank guarantee may also be called a standby letter of credit or be referred to as a bond bank guarantees from a reputable institution can help you establish business relationships increase your access to cash flow and capital protect your business from losses and set you up for international opportunities 34another type of guarantee is the loan guarantee from the export import bank of the u s this guarantees creditworthy foreign buyers of financing for u s capital goods and services purchases u s companies receive payment when the product is shipped from the u s to a foreign buyer 5the u s securities and exchange commission sec warns investors to be wary of secretive high yield investments marketed as as a prime bank program or prime world bank financial instrument these fraudulent investments may involve legitimate sounding language such as bank guarantee or standby letter of credit 6examples of bank guaranteeshere are several kinds of bank guarantees that cover various risks including 1for example the world bank offers a bank guarantee program for projects these guarantees provide commercial lenders security against payment default or failure to meet performance obligations by governments 7