- Instrument
- Bank guarantee or SBLC
- Raised by
- Applicant (corporate)
- Priced as
- Issuance commission per annum
- Coverage
- Regional and cross-border
One undertaking, many shapes
A letter of guarantee is a bank’s independent promise to pay a beneficiary against a complying demand. That independence is the point: under demand guarantee practice the beneficiary is paid on a demand that meets the terms, without having to prove in advance that you failed to perform, and the bank then looks to you. The beneficiary gets certainty; you get to bid for a contract without posting the cash — and a reason to read the wording closely.
All types of LGs can be engaged, from contractual, 100% cash and zakat to standby letters of credit and more, thereby increasing network and revenues. Each type carries its own wording, its own risk to the issuing bank, and therefore its own commission.
Cross-border is where it gets expensive quietly. A guarantee that has to be enforceable in the beneficiary’s jurisdiction usually means a local bank issuing against a counter-guarantee, and the cost of that chain is worth putting out to bid rather than accepting from one relationship bank.
The shape of the flow
A promise the beneficiary can call on. The bank stands between you and your counterparty, and pays only if you do not perform.
How it works on TradeOrigin
Post the guarantee you need, including the wording, and let banks price the issuance.
Specify the guarantee
Type, beneficiary, jurisdiction, amount, validity, claim period and the wording required — the details that actually drive the price.
Banks bid the commission
Issuing banks quote the per-annum commission and any issuance fees, without seeing each other’s bids.
Accept and instruct
Accept the bid, and the instruction to issue is recorded on the platform with the agreed wording attached.
Amend, extend or release
Extensions, amendments and the eventual release all update the same record rather than starting a new email chain.
Who it is for
Bidding and performing
Tender, performance, advance-payment and retention guarantees are the cost of doing business — and a cost worth competing for.
Securing obligations
Standby credits and payment guarantees let a counterparty extend terms they would not otherwise extend.
Deploying guarantee appetite
Guarantee business is capital-efficient and fee-generating; the platform brings the flow to banks with room for that name.
What you get
Every LG type in one place
Contractual, 100% cash, zakat, SBLC and cross-border guarantees run through the same request and bid flow.
Wording agreed before issuance
The required text sits on the deal from the start, so the bid prices the guarantee you actually need.
Cross-border reach
Where a local issuance is required, the counter-guarantee leg can be arranged bank-to-bank on the same platform.
Lifecycle in one record
Extensions and amendments are tracked against the original guarantee, with an audit trail through to release.
What the bank will ask for
Uploaded once, against the deal, and visible only to the counterparties on it.
Questions
Is a standby credit the same as a guarantee?
Commercially it does the same job and is raised through the same flow. Legally it usually sits under a different rule set — standbys are typically issued under ISP98 or UCP 600, demand guarantees under URDG 758 — so the wording and the expiry mechanics differ. The rule set applied is part of the terms carried on the deal.
Can the guarantee be issued by a bank in the beneficiary’s country?
That is what a counter-guarantee is for: your bank counter-guarantees a local issuer. Both legs can be arranged on the platform.
What about zakat and 100% cash-backed guarantees?
Both are supported as guarantee types. A cash-backed guarantee usually prices differently, and the bids reflect that.
Related
Counter Guarantee
A bank’s guarantee to a second bank, so the second bank can issue locally where the beneficiary needs it.
ProductLC Confirmation
Add a second bank’s undertaking to a letter of credit, priced by banks competing for the confirmation.
ProductRisk Participation
Share trade exposure with other banks — funded or unfunded — to free up limits and spread risk.