{{Short description|Financial guarantee from a lender}} {{refimprove|date=January 2020}}
A '''bank guarantee''' is a kind of guarantee from a lending organization. The bank guarantee also signifies that the lending institution ensures that the liabilities of a debtor are going to be met. In other words, if the debtor fails to perform the obligation, the bank will cover it. A bank guarantee allows the customer, or debtor, to acquire goods, purchase equipment or draw down a loan.<ref>[https://www.investopedia.com/terms/b/bankguarantee.asp What Is a Bank Guarantee?] ''investopedia.com''</ref> A bank guarantee is a promise from a bank or other lending institution that if a particular borrower defaults, the bank will cover the loss. A bank guarantee is similar to, but not the same as a letter of credit.<ref>[https://investinganswers.com/dictionary/b/bank-guarantee Bank Guarantee] ''investinganswers.com''</ref>
== Use in trade and project finance == Bank guarantees are widely used in commercial transactions to secure payment or performance obligations. The U.S. International Trade Administration notes that, in export finance, foreign buyers often provide a bank guarantee in the form of an aval, letter of guarantee, or letter of credit.<ref>{{cite web |title=The Trade Finance Guide |url=https://www.trade.gov/sites/default/files/2022-07/Trade_Finance_Guide_2022.pdf |website=International Trade Administration |access-date=11 May 2026 }}</ref>
In international practice, guarantees are also used in construction, infrastructure, and other project-based transactions to support bid, advance-payment, and performance obligations. The International Chamber of Commerce states that demand guarantees secure monetary and performance obligations in a wide array of international and domestic contracts.<ref>{{cite web |title=ICC announces new rules for demand guarantees |url=https://iccwbo.org/news-publications/news/icc-announces-new-rules-for-demand-guarantees/ |website=International Chamber of Commerce |access-date=11 May 2026 }}</ref>
==References== {{Reflist}}
Category:Banking Category:Legal documents Category:Personal finance Category:Real estate Category:Securities (finance) Category:Interest-bearing instruments
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