What is a bank guarantee? A bank's promise to pay if you don't
By SendPay Business · · 2 min read
- 1Name it and pick your colours
- 2Choose what it does
- 3Launch when you are ready
A bank guarantee is a promise from a bank to pay a set amount to another party if its customer fails to meet an obligation, such as paying for goods or finishing a contract. It lets businesses deal with partners who don't yet trust them.
Common types
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Tap each one to see what it means.
Performance guarantee
pays out if a supplier or builder doesn't finish the work as agreed.
Advance payment guarantee
protects a buyer who pays a deposit up front.
Payment guarantee
covers a seller if the buyer doesn't pay.
Bid bond
backs a company's offer when it tenders for a contract.
Guarantee vs letter of credit
A letter of credit is the normal way a buyer pays, once the right documents are shown. A guarantee is a back-up that is only used if something goes wrong. Both rely on the bank's promise rather than the customer's.
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What it does
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What it costs
Banks charge a fee, often a percentage of the guaranteed amount each year, and usually want security such as cash held aside or a credit line. Because the bank takes on risk, it treats a guarantee much like a loan when deciding whether to offer one.
Where SendPay fits
SendPay doesn't offer lending or bank guarantees. SendPay platforms give your customers GBP, EUR and USD accounts, transfers and branded Visa cards under your own brand, powered by licensed partners.
How it works
Money on its way- 1Pick who to pay and type the amount
- 2Tap send and it is on its way
- 3It lands in their account
Why sign up
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- 🪪A free business accountOpen it in about a minute with your business name, email, password and mobile. No card and no documents to start.
- 💳Get paid from day oneTake card payments, and share your own payment link and invoices so customers pay in a click.
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- 🚀Your own financial platformDesign and preview your whole platform free, then launch when you are ready.
SendPay Business is a technology company, not a bank. Accounts, cards and payments are powered by licensed partners.
Questions people ask
What is a letter of credit?
A bank's promise to pay a seller once agreed documents are shown.
Letters of credit →What is trade finance?
The tools banks use to help businesses buy and sell across borders.
Trade finance →What is an escrow account?
An account where a third party holds money until conditions are met.
Escrow accounts →Read next
Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.