Alternative for your bank guarantees

Why look for an alternative to your bank guarantee?

Suppose you manufacture machinery or ships or you have a construction company and you take on large construction projects. These are usually expensive projects. That's why you ask your customers if they want to pay a portion in advance. Your customer also wants to be sure that you will deliver what was agreed. Paying in advance is nice, but of course you have to deliver. Importers and exporters face uncertainty every day. Fluctuating exchange rates, changing customer demand and competitors adjusting their strategies are just a few examples.

Finding the right methods to give your business relations confidence is becoming increasingly important. Securing payment and managing your working capital are high on the list. This is expected by your investors, your customers and your suppliers. A guarantee can then be used as security for the execution of work.

Many companies choose their bank as a partner for guarantees. A major disadvantage is that this takes up your financial space at the bank as well as your working capital. It can give you significant advantages to place your guarantees with an insurer such as Allianz Trade.

+ Advantages of a guarantee with Allianz Trade

With our guarantees, you regain more control and flexibility financially. An alternative Letter of Credit or payment guarantee from an insurer may prove to be a more suitable solution for your business:

Our guarantees have competitive rates and support your contractual obligations, allowing you to continue using your existing bank guarantees.
Most importantly, our guarantee does not drain your working capital or your bank guarantees. Your bank views our guarantees as a "temporary liability" rather than a debt to the bank, so it does not appear on your balance sheet.

- Disadvantages of a guarantee with a bank

Many businesses depend entirely on their bank for financial support and trading facilities. While having only one point of contact can be an advantage, there are also disadvantages:

Costs may be high and you have less flexibility.
Your working capital may be limited. Costs from your bank or other lender may also be high, putting pressure on your expected margin.
Your bank may impose conditions on other banking services.

More information or quote?

We offer several types of guarantees

There are all kinds of guarantees: focused on (advance) payment, performance, maintenance and transfer (customs guarantee).

Take the example of the construction company. A performance bond or guarantee protects the client from damages (losses) if the contractor fails to fulfill its contractual obligations, for example, because the company goes bankrupt. The client will receive the amount covered by a guarantee and can use this money to have the work completed by another contractor. Has the work been completed and defects are found? A guarantee can be entered into for that too.