Assure your business commitments with the power of a Banker’s Guarantee

Working with international partners or larger organisations is rewarding but can also be a complex process with multiple parties involved. Whether you are an SME owner bidding for a large-sized contract, securing payment for goods and services, or looking to purchase a large quantity of goods from a new supplier, a Banker’s Guarantee (BG) can be an invaluable tool that offers you peace of mind and security.

What is a Banker’s Guarantee?

A BG is a commitment made by a bank on behalf of their clients to fulfill a financial obligation if these clients are unable to do so. It is a form of assurance to the client’s partners that they would receive payment or compensation in the event of a non-payment or unforeseen disruptions. Having a BG provides a level of security for business transactions to proceed with assurance, and opens up opportunities for businesses’ growth and expansion.

Apply for an Express Banker’s Guarantee on the UOB SME app or UOB Business Banking website and enjoy S$100 fee waiver*!

Here are some scenarios and common types of BGs which might be useful for you:

Types of BG

1. Bid Bond

Many clients require a BG as proof of their company’s financial stability. It can also enhance credibility and put them in good standing to secure large contracts.

Example
Company A is an SME hoping to sign off on a high-value contract with a large corporation to supply specialised machinery. The corporation requires a BG. Company A proceeds to obtain a BG from UOB which demonstrates the Bank’s assurance on Company A’s financial stability and therefore strong position to make business commitments for such deals, enabling them to secure the contract with peace of mind.

2. Performance Bond

When advance payments are required by clients, having a BG can offer assurance that the client’s money is secure and will be refunded if the BG requestor is unable to to deliver what was agreed.

Example
Company B is bidding for a large government project. A BG is required and Company B obtains a BG from UOB. During the project, there are unforeseen external circumstances which lead to Company B being unable to meet the delivery deadline and the buyer seeks compensation for the delay. Company B is unable to fulfill this request and UOB assists Company B in fulfilling their contractual obligation.

3. Advance Payment Guarantee

When trading with new or unknown import/export partners, having a Banker’s Guarantee in place can mitigate risks of non-payment or non-delivery issues.

Example
Company C is required to make an advanced payment in order to purchase goods from a new supplier. Company C can request for the new supplier to apply for a BG from UOB. Due to unforeseen circumstances, the supplier was unable to deliver the goods as agreed. Company C invokes the BG, prompting UOB to evaluate the matter. Once UOB has completed the evaluation and determined outcomes in Company C’s favour, the guaranteed amount is paid out to Company C.

4. Rental Guarantee

This offers businesses greater operational efficiency, risk mitigation and financial flexibility, benefitting both tenants and landlords in industrial and commercial leasing agreements.

Example
Company D is renting a property for business purposes. Instead of providing a security deposit for the rental bond, Company D proposes to use a BG. Obtaining a BG from UOB assures the landlord that Company D’s financial obligations will be met. This enables Company D to keep their funds liquid for other business expenses. What’s more, the funds used to secure the bond can be placed with UOB in the form of a fixed deposit, which can earn interest. When the guarantee is no longer required, the funds can be released quickly.

What are the benefits of a Banker’s Guarantee for SMEs?

• Eligibility for contracts: Large contracts, or those involving international trade, may require proof of financial security. SMEs with a BG may have access to these which they might otherwise be unable to secure due to their smaller company size.
• Smoother international trade transactions: Having a BG can speed up international trade transactions by assuring foreign partners that due payments will be made.
• Lower risks for all: SMEs can mitigate risks of non-payment or disruptions to business performance by securing a BG, therefore offering peace of mind to all parties involved.
• Maximise liquidity: By using a BG to secure contracts and loans, SME owners can avoid having to set aside working capital as collateral.
• Increased credibility: SMEs can authenticate themselves as financially stable and committed partners who are able to fulfil contractual obligations.

eGuarantee@Gov

This is a simple and secure digital process for businesses to provide a banker’s guarantee or insurance bond to government agencies within a day.

Under this programme,a original hard copy BG will no longer be required by participating government agencies and UOB will submit customers’ BG data electronically. eGuarantees can be issued for purposes such as procurement, revenue contracts, land sales and regulatory/licensing requirements.

For more information on eGuarantee@Gov, click here.

Understanding the benefits of a BG can help SMEs thrive and expand in today’s competitive business landscape.

To find out more about a BG, visit your nearest UOB branch or contact your UOB Relationship Manager today.

Important Notice and Disclaimer

*Terms and conditions applicable to the UOB Express Banker’s Guarantee apply.

The information contained in this publication is based on certain assumptions and analysis of publicly available information and reflects prevailing conditions as of the date of the publication. Any opinions, projections and other forward-looking statements regarding future events or performance of, including but not limited to, countries, markets or companies are not necessarily indicative of, and may differ from actual events or results.

The views expressed within this publication are solely those of the author’s and are independent of the actual trading positions of United Overseas Bank Limited, its subsidiaries, affiliates, directors, officers and employees (“UOB Group”). Views expressed reflect the author’s judgment as at the date of this publication and are subject to change.

UOB Group may have positions or other interests in, and may effect transactions in the securities/instruments mentioned in the publication. This publication is not an offer, recommendation, solicitation or advice to buy or sell any product or enter into any transaction and nothing in this publication constitutes accounting, legal, regulatory, tax, financial or other advice. Please consult your own professional advisors about the suitability of any transaction/ investment product/securities/ instruments for your investment objectives, financial situation and particular needs.

UOB Group may have also issued other reports, publications or documents expressing views which are different from those stated in this publication. Although every reasonable care has been taken to ensure the accuracy, completeness and objectivity of the information contained in this publication, UOB Group makes no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability relating to any losses or damages howsoever suffered by any person arising from any reliance on the views expressed or information in this publication.

This publication has not been reviewed by the Monetary Authority of Singapore.