Bank Guarantee

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DEFINITION of 'Bank Guarantee'

A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it.

INVESTOPEDIA EXPLAINS 'Bank Guarantee'

A bank guarantee enables the customer (debtor) to acquire goods, buy equipment, or draw down loans, and thereby expand business activity.

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RELATED FAQS
  1. What's the difference between a letter of credit and a bank guarantee?

    Learn how letters of credit and bank guarantees differ, how they are used by banks and companies, and how buyers apply to ...
  2. Are U.S. banks authorized to issue bank guarantees or medium term notes (MTNs)?

    Bank guarantees and medium term notes (MTNs) are different types of instruments that serve different purposes for corporations. ...
  3. What's the difference between a bank guarantee and a letter of credit?

    A bank guarantee and a letter of credit are similar in many ways but they're two different things. Letters of credit ensure ...
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