As a bank that supports small and medium-sized business, we know how important it is to develop professional and reliable relationships with your business partners, regardless of whether they operate in or outside of the country.
For this reason, we offer a variety of financial services that make doing business with partners more secure.
What is a bank guarantee?
A bank guarantee is a financial instrument that ensures the timely payment of goods and services, as well as the fulfilment of the contractual obligations of partners.
This financial instrument guarantees the fulfilment of contractual clauses, defending the interests of both the seller and buyer (contractor and principal). The issuing bank guarantees that in the case of non-fulfilment of contractual obligations on the part of a client, it will pay the beneficiary the amount defined in the guarantee.
Example
You deal in furniture and regularly receive goods from a specific supplier; you propose a deferred payment, for example, within 60 days of invoicing. Your supplier agrees to make regular deliveries at deferred payment, as the guarantee ensures that your bank will make the payment if you are not able to meet your payment obligations. By issuing a bank guarantee, we undertake an irrevocable commitment to pay if you do not fulfil your contractual obligations to the supplier.
In this way, you receive goods at deferred payment conditions and your partner is certain that they will receive payment for the goods they deliver.
Types of guarantees
- Payment guarantee
- Performance guarantee
- Guarantee for payment of customs duties
- Advance payment guarantee
- Other, depending on the specific needs of the client and the business
| Fees | see Price List of ProCredit Bank |
| Currency | local and inernational |
| In favour of | beneficiaries in the country or abroad |
| Security | Fitch rating BBB- |
What is a letter of credit?
A letter of credit is a financial instrument for payment purposes that minimises the risks borne by the parties to a business deal.
In business, buyers often pay in advance, bearing the risk of not receiving a shipment in due time or the quality of goods not being as agreed upon. In other cases, the seller first delivers the goods and then waits for the payment, bearing the risk that the payment may be delayed or that there may be other problems related to the transaction.
A letter of credit is an undertaking from a bank to pay a seller if the seller fulfils the conditions set out in the letter of credit. In order to make the payment, the bank requests specific documents from the beneficiary (seller) as proof that the goods have been supplied as per the terms agreed upon and the method set out in the letter of credit.
Example
Your business conducts import activities. A letter of credit issued by ProCredit Bank allows you to avoid risks related to the non-fulfilment of shipment obligations on behalf of the seller by defining conditions in a letter of credit. These conditions define what must be fulfilled in order for your business partner to receive payment for the services they have provided.
If your business conducts export activities, you can use a letter of credit to avoid not being paid for the goods you have delivered. If you have a letter of credit, it is not necessary to take the financial situation of your business partner (buyer) into consideration when concluding a contract, as the bank will secure the payment.
Types of letters of credit
- Sight letter of credit
- Deferred payment
- Non-transferrable letter of credit
- Transferrable letter of credit
- Standby letter of credit
- Import/export letter of credit
| Fees | see Price List of ProCredit Bank |
| Currency | local and international |
| In favour of | beneficiaries in the country or abroad |
| Security | Fitch rating BBB- |
What is documentary collection?
Documentary collection is a payment instrument that is widely used in international trade. It reduces the risks borne by both importer (buyer) and exporter (seller).
Usually a buyer is concerned that if they pay in advance, the shipment may not be delivered. Whereas the seller is concerned about problems with the payment in the case of the advanced shipment of goods. Documentary collection is used to avoid such issues.
Example
In this type of payment, the exporter submits the shipping documents of the goods to be delivered to his or her servicing bank. The exporter instructs the bank to send the documents to the importer’s bank stating the conditions under which the buyer’s bank can deliver the documents to its client. Usually the instructions are for the bank to only deliver the documents after the buyer has made the payment to the exporter. This way, the exporter is certain that the buyer cannot receive the shipment before making the payment. Furthermore, the buyer is certain that they have paid for a shipment, which already is on the way to its destination.
Documentary collection also offers the option of deferred payment.
Types
- Import documentary collection
- Export documentary collection
| Fees | see Price List of ProCredit Bank |
| Currency | international |
| In favour of | beneficiaries in the country or abroad |
| Security | Fitch rating BBB- |
