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. Why is a bank guarantee important in a long-term project contract?

    A bank guarantee promises that if the company carrying out the project defaults on any of its loans, the bank will cover ... Read Full Answer >>
  2. What is the difference between a bank guarantee and a bond?

    A bank guarantee is a promise from a bank or lending institution that, if a borrower defaults on repayment of a loan, the ... Read Full Answer >>
  3. How is a bank guarantee different from a traditional loan?

    A traditional bank loan involves a credit application and a conditional transfer of the bank's funds to the borrower. Bank ... Read Full Answer >>
  4. What's the difference between a letter of credit and a bank guarantee?

    Bank guarantees represent a more significant contractual obligation for banks than letters of credit do. A letter of credit ... Read Full Answer >>
  5. 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. ... Read Full Answer >>
  6. 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 ... Read Full Answer >>
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