Non-Funded Facilities/Trade Finance

1. Bank Guarantees / Letter of Guarantees

A bank guarantee is a written promise issued by a bank at the request of its customer, undertaking to make payment to the beneficiary within the limits of a stated sum of money in the event of default by principal.

 

The most purposes for the uses of Bank Guarantees are:

  • Bid Security (Bid Bond Guarantee):

A Bid Security, also called a Tender bond or a tender guarantee, is an undertaking by a Guarantee issuer (usually a bank) to pay a sum of money to your prospective buyer (the beneficiary) if you win a Bid for a project but then fail to enter into the project contract.

 

  • Performance Guarantee (Performance Bond):

The performance Bank Guarantee is an irrevocable undertaking of a bank to pay a certain amount to the beneficiary of the guarantee within the specified limits of the guarantee if the bank’s customer who has requested the bank to issue such guarantee (the principal) has failed to fulfill his obligations towards the beneficiary.

 

  • Advance Payment Guarantee:

A guarantee issued by a bank, on behalf of a seller to a buyer, in relation to any advance payment that is made by the buyer to the seller to allow the contract to commence. If the contract is not completed the buyer can claim reimbursement of the advance payment under the guarantee.

 

  • Retention Bond:

A type of performance bond that protects the beneficiary after a job or project is finished. It guarantees that the contractor will carry out all necessary work to correct structural and/or other defects discovered immediately after completion of the contract, even if full payment has been made to the contractor.

 

  • Financial Guarantee:

The Guarantee is issued by one bank to another bank and is not contract related. The bank extends a certain credit limit to a borrower against a security (deposit or mortgage of property) for which the borrower has already placed in another bank.

 

  • Deferred Payment Guarantee:

Deferred payment guarantee is issued by the bank at the request of customer when the goods or other items have been purchased from the creditor on terms of payment after specified time in installments. The debtor requires such guarantee from the bank for creditor.

 

  • Bank Guarantees (BG) required documents:
    • Open a corporate bank account
    • Article of Association of the company
    • TIN of Company, president and vice president
    • Valid business license of the company
    • Additional documents if any required

 

2. Letter of Credit (LC):

International trade is a very important segment in the world economy now days. The letter of Credit (LC) is a major factor to facilitate international trade.

Afghan United Bank assists the importers and exporters worldwide in appropriate ways.

 

The types of LC are as following:

  • Sight LC:

This type of letter of credit is payable to the beneficiary once the required documents are presented to the financial institution backing the letter.

 

  • Usance LC or deferred LC:

A type of letter of credit used often in trade finance whereby the issuing bank must make payment by a preset date. Once a sale contract is agreed upon between a buyer and a seller, the buyer can request that a letter of credit be used to secure the transaction.

 

  • Letter of Credit (LC) required documents:
    • Open a corporate bank account
    • Pro-forma Invoice
    • Contract between buyer and seller
    • Valid business license of the company
    • Additional documents if any required