What is a Standard Letter of Credit (LC) or Bank Guarantee?

Standard Letter of Credit also referred as Bank Guarantee (BG) is where one Bank (the Issuing Bank A) issues an indemnity (cover/insurance) to another Bank (the Beneficiary Bank B) or directly to a Beneficiary, on behalf of its account holder. The Issuing Bank will expect its account holder to pledge ‘assets’/cash to the bank for its issue.

There are effectively two main types of Bank Guarantees,

  1. A Direct Guarantee where the account holder instructs his bank to issue a Guarantee directly in favor of the Beneficiary, and
  2. An Indirect Guarantee where a second bank is requested to issue a Guarantee in return for a counter-Guarantee. In this case the Issuing Bank will indemnify losses made by this second bank in the event of claim against the Guarantee.

A Bank Guarantee is considered a “Demand Guarantee” and as such is governed by the International Chamber of Commerce (ICC) Uniform Rules for Demand Guarantees (URDG).

How can a Bank Guarantee/Standby Letter of Credit help you?

For agents, brokers, corporations, government linked companies, small-medium sized enterprises, and traders can assist in:

  • *Acting as a Performance Guarantee (Performance Bond)
  • *Acting as a Payment Guarantee
  • *Acting as a Conditional Payment Guarantee (Conditional Payment Undertaking)
  • *Guaranteeing and securing a Credit Line/Loan
  • *Acting as an Order & Counter Guarantee

TFC can  help you obtain this important financial instrument within a 48 -144 hour turnaround time upon full submission of documents required.

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