Bank guarantee cost calculator
Work out what a bank guarantee costs: the bank's fee for the time it runs, any one-off fee, and how much cash you may need to hold aside as security. Free, no sign-up, nothing leaves your browser.
- 1Type in your own numbers
- 2The tool works it out
- 3See the answer clearly
Use the fees and security your bank quotes; the starting figures are only an example. Some banks charge per quarter or set a minimum fee, so check how yours works it out.
What a bank guarantee is
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. Common types are performance guarantees, advance payment guarantees, payment guarantees and bid bonds. Unlike a letter of credit, which is the normal way a buyer pays, a guarantee is a back-up that is only used if something goes wrong.
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.
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