Some of the most frequently used guarantees
Several types of guarantees might be included in the same contract
Danske Bank arranges different types of guarantees covering different risk scenarios, helping you trade with others, thereby facilitating growth. Local conditions and regulations decide whether we issue the guarantee, or if the guarantee should be issued by a local bank in the beneficiary's country against our counter guarantee.
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Green guarantees
Green guarantees function similarly to conventional guarantees in that they are designed to ensure that specific obligations are met between a seller and a buyer through collateral, typically upon the completion of a project or the fulfilment of a contract.
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Sustainability-linked guarantees
A sustainability-linked guarantee is designed to ensure the fulfilment of an agreement between a buyer and seller. What makes a sustainability-linked guarantee unique, is that it links the terms of the guarantee to meeting ambitious sustainability performance targets.
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Bid guarantees
A bid guarantee ensures that the party inviting to a tender (the importer) receives an agreed compensation if a tenderer (the exporter) defaults on their obligations under an international tender. Often, a tender will not even be considered without a bid guarantee.
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Advance payment guarantees
Advance payment guarantees are used primarily in connection with contracts for substantial capital goods under which it has been agreed that the importer will pay part of the purchase amount in advance. An advance payment guarantee ensures that the exporter will pay back the advance payment if they fail to meet their contractual obligations.
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Performance guarantees
A performance guarantee ensures that the importer receives an agreed compensation if the exporter fails to meet their obligations towards the importer. For instance, such failure of performance may relate to delivery, function or quality. Typically, a performance guarantee covers 10-20% of the agreement amount.
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Retention guarantees
Retention guarantees are used when it has been agreed that the importer will pay the remaining part of a purchase amount – which the importer would normally have retained during the guarantee period – to the exporter before the amount falls due. A retention guarantee ensures that the exporter will pay back this amount if failing to meet their contractual obligations.
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Payment guarantees
A payment guarantee ensures payment to the exporter if the importer does not fulfil their payment obligations.
A payment guarantee can also be issued in the form of an endorsement on a draft, also known as an “aval.” In such cases, Danske Bank guarantees the payment of the draft.
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