Taking the risk out of trade

Trading partners rely on building trust. But few business leaders can afford to rely solely on trust when money is at stake. Bank guarantees provide trading partners with protections that cover virtually every phase of the transaction between buyer and seller. While these guarantees cannot ensure that both parties fulfill their contractual obligations, such as payments or deliveries, they do ensure that compensation is paid when the situation warrants it.

Typically, the terms that are to be secured by guarantees are defined once both parties have agreed on contractual arrangements and may be specific to that particular trade. Nordea will work with you to draft the appropriate guarantees when some of your obligations are to be secured.

Guarantee types

The most common bank guarantee types in an import transaction are:

  • Payment guarantees: Secures the applicant’s ability to fulfill its payment obligations to the beneficiary. Usually the guarantee will cover the entire value of the underlying contract, less any advanced payments made by the applicant.

  • Guarantee for a missing bill of lading (letter of indemnity): Authorizes a transport carrier or its agents to release specified cargo to a consignee named in the bill of lading without the surrender of the original bill of lading.

  • Customs guarantee: Issued in favor of customs offices as security for payment of customs duties by an importer.

The most common bank guarantee types in an export transaction are:

  • Bid bond/tender guarantee: Usually issued for an amount up to 5% of the value of the tender. The purpose of these guarantees is to cover the risk that the company submitting a tender will not abide by its offer or deliver the required performance.

  • Advance payment guarantee: Issued when the buyer/manufacturer pays the contract price or part thereof in advance and requires security for a refund if the merchandise is not delivered, or if the delivery is not in accordance with the contract.

  • Performance guarantee: Secures the seller's/performers contractual obligations.

  • Warranty guarantee: Covers the buyers after goods are delivered or work is completed during any agreed warranty period.

  • Retention money guarantee: Ensures that the correct repayments are made if the applicant fails to meet its contractual obligations during the warranty period.

Standard guarantees

The texts are provided for reference and guidance purposes only. Any individual guarantee to be issued by the bank shall be separately drafted for the relevant case. The bank assumes no responsibility for the use by visitor's to the website of these guarantee texts. The texts are subject to Nordea's General terms for use of website.