The two differ although they may sound similar. A bank guarantee in city Dubai refers to a written commitment which is usually issued by a bank when requested by one of various parties in a transaction. The bank therefore promises to pay a beneficiary a sum of money that is specified for cases that are also specified in the agreement. The lender assures payment of the cash. This is usually in the case that the terms defined in the agreement are not met.

Bank guarantees are not just issued in trades, they are as well given to government authorities when bidding land or when it is undertaking projects. For example a person needs a bid for a road project will provide the assurance to government authorities.

There are different types of bank guarantees available in city Dubai. Among them is advancement payment guarantee. The lending institution promises to pay back the buyer his or her advanced amount in a case where the seller fails to administer the specifications of a contract. Another one is performance bid. In such a case, the lender will guarantee paying the beneficiary if a contract is not fully fulfilled by a service provider.

Bid bond. The aim of this is recovery of expenses by an organizer of a contract, of money lost when the winner of a contract declines to perform. This certainly leads to an announcement of another tender. All guarantees given by lenders must have a purpose for issuance and ability to last for a specified period. It is normally revoked at the end of the duration or when the purpose is met.

Guarantees by banks are important since they assist you to minimize risks that you can encounter when a party you enter into contract with fails you. Letters of credit are different because their purpose is to see that transactions happen as had been planned. The lender is obliged to make payment once terms are fully met. It is responsible for transferring funds. Payment of cash is therefore assured.

The two are common in the sense that they both guarantee a specified sum of money to beneficiaries. The difference is that guarantees by banks are only paid when an opposing party fails to perform as per the agreement. This will be used either by sellers or buyers to insure against loss or damage as a result of nonperformance by the other party involved in a contract.

This bank is usable by a buyer in a case where he or she receives goods from a seller but cannot pay because his or her financial status does not allow. It can be used at the same time by a seller who is unable to deliver goods to a buyer as agreed upon. The purchaser will receive the specified amount of cash from the lender. Guarantees by lenders therefore are used as safety measures for any party in a transaction.

Lastly, the two types of transactions are very helpful. Individuals can freely carry out trade activities with customers from any part of the world. These are options that greatly reduce risks involved. A mutual trust between trading parties is also built.

You can visit www.bwtradefinance.com for more helpful information about Differences Between A Bank Guarantee And Letter Of Credit.