Performance bank guarantee
A performance bank guarantee, i.e. a contract bond, ensures that the work performance or procurement agreed on by the contractor or developer will be implemented as agreed on. A performance bank guarantee is also called “contract bond during construction”. The guarantee is valid until the end of the construction period and the usual security deposit is around 10 per cent of the contract price or procurement price.
Rental security deposit
A rental security deposit is provided for the landlord as security for the rental payments and other obligations laid down in the tenancy agreement. An amount equalling three months’ rent at maximum is considered an appropriate rental security deposit.
Advance payment guarantee
An advance payment guarantee may be issued when the contract price or a part of it is paid in advance. The purpose of this guarantee is to secure the refund of the advance payment received by the customer in full or in part to the constructor/client if the work or delivery is not performed in accordance with the contract. Thus with an advance payment guarantee you can obtain more favourable payment terms for your contract.
Bank guarantee ensures smooth partnership
A bank guarantee functions as security in many kinds of contracts. For instance, it may be issued as security for a delivery, a guarantee period, a contract price payment, a rental payment for business premises or for compliance with some other contractual obligation. Your company may also use a bank guarantee to meet its statutory security obligations.
Bank guarantees help in financial risk management especially in the case of major projects and new contracting parties. The advantage of a bank guarantee is that you don’t have to prove to your partner your company’s creditworthiness or ability to meet the obligations laid down in your contract.
By offering your contracting party a bank guarantee from Nordea you can prove to them that they are dealing with a reliable counterparty. You can also require a bank guarantee from your contracting party if you want to be sure that your partner will be able to fulfil the contract terms and conditions.