Letter of guarantee

How it is used

Also called a bank guarantee (LG or BG) and very common in Turkish corporate banking. Main types are bid bonds for tenders, performance bonds and advance payment guarantees. It is a non-cash loan: the bank pays only if the guarantee is called, and charges a commission. In the US a 'standby letter of credit' often plays the same role.

Example sentences

1. The contractor must provide a performance letter of guarantee before signing the contract.

2. The municipality called the letter of guarantee after the work was delayed.

Common collocations

• issue a letter of guarantee
• performance guarantee
• bid bond
• call a guarantee
• guarantee commission

Related terms

• trade financeBanking products that help importers and exporters pay and get paid safely, and that finance goods while they are produced, shipped or sold.
• letter of creditA bank's written promise to pay the seller in an international sale, provided that the seller presents the required documents, such as the bill of lading and invoice.
• credit facilityAn arrangement in which a bank agrees to lend a company up to a set amount, which the company can draw on as needed under agreed terms.
• issueTo create and offer new shares, bonds or other securities to investors; also to produce an official document or card, such as a credit card or a guarantee.
• corporate bankingBanking services for large companies, such as loans, cash management, trade finance and foreign exchange.

More terms: Trade Finance

• documentary collection
• bill of exchange