Purchase Owned BG or Bank Guarantee

2. Standby Letter of Credit and Bank Guarantee; Make Your Choice

4. Standby letter of credit and bank guarantee both are very popular bank instruments mainly used in making transaction internationally. But it is not unusual to see them use in US sales, purchases and transactions as a proof of having access to money in a short notice. Even if both represent almost the same things but many prefer bank guarantee more as it provide more protection.

5. Bank risk: The risk faced by bank is almost the same for both standby letter of credit and bank guarantee, but since bank guarantee offers more protection so the risk also increase a little in BG or bank guarantee. As these documents contain risk for bank so it is not possible to get an automatic approval for these. Depending on your credit standing a bank might accept or reject your request for standby letter of credit or bank guarantee.

7. Bank guarantee and standby letter of credit had one major similarity that it provides guarantee to sellers that they will get paid for the items they sold. In case of a not receiving the payment in time the seller can “call in” the letter of credit or bank guarantee to ensure to receive the payment and ask to act on them. Bank guarantee and standby letter of credit become very popular to deal with uncertainties of international sales and currency exchanges.

8. Difference in the provided protection: Even if the main work is the same for both standby letter of credit and bank guarantee but there is a major difference in the protection provided by both documents. And the difference is both standby letter of credit and bank guarantee offer protection to seller but only bank guarantee also provide protection to the buyer too.

10. To a seller there is not much difference in a bank guarantee and standby letter of credit. But in case of buyer a Purchase Owned BG or bank guarantee matter a lot as it provide protection in case you don’t receive the purchased item from the seller or the item comes in a damaged condition. A bank guarantee will help to reimburse the money from the seller that acts as a non-performer towards you.

12. Differenced in the performance:  Both standby letter of credit and bank guarantee ensure that a seller get paid for their sold product. But most of the sellers mostly prefer standby letter of credit over bank guarantee due to its benefits. Because standby letter of credit offers fast, guaranteed payment, including currency conversion, if the case it needed and send directly to the bank account of the seller.