About bank guarantee
A bank guarantee is the bank’s obligation to pay the beneficiary of the guarantee the amount specified in the letter of guarantee, if the guaranteed obligation is not fulfilled.
The bank provides only financial security in a guarantee transaction – if contractual obligations are not met, the beneficiary of the guarantee will receive its money, but the bank will not interfere with the execution of the agreement as bank guarantee is not legally bound by the purchase and sale agreement.
The claims submitted under a letter of guarantee are paid by the bank on the beneficiary's request without requiring proof of the violation.
Apart from minimizing the risk of agreement unfulfillment, the service helps to improve mutual trust between business partners.
Types of guarantee
Tender guarantee (bid bond)
The bank undertakes to pay the guarantee amount for contracting authority (organizer of procurement) if the tenderer withdraws their bid and/or will not enter a on the offered terms
Performance guarantee
The bank undertakes to pay the guarantee amount for buyer of goods or services if seller fails to fulfil its obligations, e.g. to dispatch goods
Advance repayment guarantee
The bank undertakes to pay the guarantee amount for buyer who makes advance payments for goods or services if seller defaults on delivery
Payment guarantee
The bank undertakes to pay the guarantee amount for seller of goods or services if buyer fails to pay for delivered goods or services
Warranty guarantee
The bank undertakes to pay the guarantee amount for buyer of goods or services if seller defaults on warranty obligations
Customs surety
The bank undertakes to pay the guarantee amount for guarantee that bank pays tax arrears to the Tax and Customs Board
How does bank guarantee work?
- In a purchase and sale agreement, it is agreed that the buyer’s payment obligation is secured with the buyer’s bank guarantee.
- The buyer applies for issuing a guarantee in favour of the seller and the buyers bank issues it.
- After dispatching the goods as agreed, the seller submits the required documents to the buyer and asks them for payment.
- If the buyer pays to the seller as agreed, the guarantee expires unapplied.If the buyer does not pay, the seller submits a claim to the bank to request the settlement of the unpaid amount under the letter of guarantee.
- The buyer’s bank pays the requested amount to the seller.
- The buyer’s bank informs the buyer of the claim and the buyer will pay the requested amount to their bank.
Additional info and price list
| Guarantee issued by AS SEB Pank | |
|---|---|
| 1. Agreement conclusion and/or amendment | as agreed |
| 2. Fee for issuing a letter of guarantee under a limit agreement | EUR 95 |
| 3. Guarantee fee | determined as a percentage rate individually for each applicant on the basis of the client's risk and the validity of the guarantee, min. EUR 95 |
| 4 Fee for issuing a letter of guarantee with special wording | EUR 150 |
| 5. Preparation of a draft or a guarantee or an amendment | EUR 70 |
| 6. Payment of claims filed on the basis of guarantee | 0.1% of the amount of claim, min. EUR 150 |
| 7. Amendment of a guarantee (the relevant guarantee fee is added if the amount is increased and the validity extended) | EUR 95 |
| 8. Cancellation of a guarantee | EUR 70 |
| 9. Default interest (calculated on any debt from due date until actual date of payment) | 0,5% per day |
| 10. Information processing and forwarding fee (added to foreign guarantees) | depending on costs, min. EUR 10 |
| 11. Handling of documents or their drafts and payment fee | 0,15% of the amount of documents, min. EUR 95 |
| 12. Services provided to other credit institutions | the fee is set for each individual transaction |
| Guarantee received by a client of AS SEB Pank | |
| 1. Advising | EUR 70 |
| 2. Advising of an amendment | EUR 70 |
| 3. Filing a payment claim to the bank that issued the guarantee when requested by client | EUR 100 |
| 4. Preparation of the draft of a guarantee, an amendment or a claim | depending on costs, min. EUR 70 |
| 5. Verification of the guarantee authenticity | EUR 70 |
| 6. Advising the issuing bank of cancellation of a guarantee | EUR 70 |
| 7. Information processing and forwarding fee | depending on costs, min. EUR 10 |
| 8. Handling of documents or their drafts and payment fee | 0,15% of the amount of documents, min. EUR 95 |
| 9. Services provided to other credit institutions | the fee is set for each individual transaction |
NB! The services charges of another bank may be added if another bank is used.
AS SEB Pank reserves the right to charge for additional services and/or time-consuming transactions in addition to the price list.
Required documents:
- Filled application
- Agreement (guarantee of performance) or invoices (guarantee of payment) concerning which the issuing of a letter of guarantee is being sought
- Latest annual report and interim report on current financial year
- A valuation report if a property is offered as collateral
- If you are not a customer of SEB, account opening is needed
Simple to apply
Register for consultation
We will contact and advise you
Send the filled application to info@seb.ee
After a positive decision, sign the agreement
Cooperation with EIS
In cooperation with EIS we offer the option to get additional collateral (guarantee) to companies that need to increase the access to financing solutions.
Other options to finance your trade
Factoring
Change your invoices into cash flow. Offer extended payment terms to your clients, without reducing your working capital or sales volume.
Letter of Credit
For companies active in worldwide trading:
- For importers it minimizes the risk of wrong deliveries since the bank only pays if the seller shows the agreed documents.
- For exporters it secures the payment from the buyer.
Documentary Collection
A payment form which a Seller/Buyer can use to strengthen its position in a trading transaction.
Want to make sure you find a suitable solution?
- Our client executives will help you find the suitable financing solution for your business
- We have a dedicated team of professionals you can trust
