If you want to secure your transaction or be a more reliable business partner, you can take up a bank guarantee. Bank is then a guarantor of proper performance of service by you, and if it is not met or will be met the Bank undertakes to pay a sum of money to a specific operator.
To obtain a bank guarantee one needs to apply for it to a bank and meet certain conditions. Each bank has different requirements and charges.
You sign an agreement with a bank (the payer) to payment of a specific sum of money (the amount guaranteed), to a specified in the contract entity (the beneficiary of the guarantee).
Remember! In the bank guarantee very important is the guaranteed amount, namely the amount to which guarantee applies. This does not have to be the amount in PLN. It may be in another currency.
A bank guarantee is of mutual benefit. When you are the beneficiary of the guarantee, that is your business partner has a bank guarantee you have greater certainty for investment to be successful. In the case of non-performance you will receive payment fast. It is sufficient that you contact a bank (the guarantor) and submit the required documents or a statement. You do not have to go to the court, or start the recovery procedure.
When you are the principal, your credibility as an entrepreneur increases and you can count on more favourable contracts. In addition, you do not use your own resources, so you can maintain financial liquidity.
Bank guarantees are recognised not only in Poland. Most banks have a transnational dimension and bank guarantees are accepted outside Poland. Please note that you can apply for a guarantee in different languages, not only in English.
A bank guarantee is chargeable. Bank charges a commission for the bank guarantee. The commission is paid by an entity which has concluded with the bank a contract (the principal). The cost of providing the guarantee depends on the type of the guarantee, guaranteed amount and currency. In each bank price is different and it is generally defined as the percentage of the amount guaranteed, for example, 0.25 % — 1 % of the minimum guaranteed amount, minimum PLN 100.
Guarantees may be granted once as an individual guarantee covering a particular transaction or in the form of line, within the fixed limit. A commission may be paid for a certain period, for example, for every three months of the duration of the commitment period.
In addition to the commission some banks also charge a fee for the creditworthiness assessment and the fee for examination of the application of granting the guarantee.
The bank guarantee step by step
You apply to the bank for a creditworthiness assessment. Bank examines your capacity for the timely fulfilment of obligations, throughout the period of validity of the guarantee.
You commission a bank to grant a bank guarantee. If you received information from the bank that your creditworthiness enables you to apply for a bank guarantee, you must submit an application (grranting bank guarantee) together with the required documents. It can be submitted in a traditional form, personally at a bank in paper form or via online banking.
Each bank may request other documents. The most common ones are:
- documents of incorporation (agreement, articles of association),
- documents indicating the persons entitled to submit statements in respect of the property rights and obligations
- confirmation of assignment NIP and REGON number
- the financial documents of company,
- a contract which is to be covered by the guarantee,
- proposed collateral.
Some banks also require to have a current account (business) in their bank.
You propose collateral for granted bank guarantee (monetary amount), you specify (or choose) the conditions that the beneficiary must fulfil to receive guaranteed amount and you pay fees and commission.
Use of a bank guarantee. The content of the guarantee must describe in detail the documents, content and in what form they are to be submitted to the bank so as to receive the payment of the guaranteed amount. This may be a mere statement in writing or written statement together with the documents specified in the contract.
Types of guarantee
There are different types of guarantees depending on the type of security. It may be guarantee of:
- due performance of contract
- timely repayment of credit or loan,
- timely payment,
- payment of the leasing instalments,
- reimbursement of the advance
- payment of rent
The period of validity of the guarantee
The guarantee shall be valid for the period for which it was concluded. However, there are other reasons than passage of time for the expiry of the guaranty, for example:
- the principal will implement his commitment towards the beneficiary and documents it in the manner set out in the guarantee,
- the beneficiary relieves the bank from all the obligations laid down in the guarantee before the expiry of the period of validity,
- the guarantee is cancelled (if the contract provided for possibility to cancel it)
- bank complies with obligations made in the guarantee.
Find out more about the possibility to obtain funds for the development of business in the framework of the loan and guarantee funds from the article: Loans and guarantee funds.
Bank Gospodarstwa Krajowego jointly with the European Investment Fund shall implement the COSME programme aimed at micro, small and medium-sized enterprises looking for security of working capital loan to finance the investment. For more information please visit the BGK website.