What is a bank guarantee? A bank's promise to pay if you don't
By SendPay Business · · 2 min read
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
- 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.
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.
Build it
Create your own financial platform.
Pick a template, name it, brand it, preview every page before you pay. Your brand, your users, your fees.
Build my platform →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
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. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.