By - Anna Torres

A Bank Guarantee Vs a Bond: What’s The Difference?

From guarantor loans to bank bonds, everyone is looking for some form of credit. Borrowing money is a necessity in today’s world and it’s all because of modern life and lifestyles. Buying a car outright is not always a possibility and in business, being able to afford the latest computer equipment or machinery is difficult. No matter who you are, you may require credit, but which is the one for you? Bank guarantees and bonds are common, but what are the differences between the two and will you be eligible for them?

Bank Guarantees

A bank guarantee is also known as a letter of credit. Banks or financial institutions may create a bank guarantee where a financial institute promises that the borrower will be able to repay the money and if they don’t, they step up and take on the burden or repayment. Essentially the banks or financial institutions promise the borrower has the ability to repay a loan. Its protection should a party of the contract fail to meet their specified obligations. You can look for guarantor loans online, but in business, bank guarantees may be a more suitable option in some circumstances.

Bonds

A bank bond may also be known as a surety bond. This is quite different from a bank guarantee, in which it is used as protection for a party of contract. If a broken contract takes place, the other part can be compensated for the loss they have received. For example, a computer software company wants new fixtures installed and calls in an electrician; the software company can choose to take out a surety bond if they believe the electrician will damage their property. Should the electrician damage the office, they can be compensated through the surety bond. Also, the electrician can take out a policy to ensure if there is a refusal of pay, they’re paid by the bond. Like guarantor loans there is an element of security for both sides. See more!

Which Do You Need?

It depends on the type of business you have and the contract in which you’re entering into. For example, if you have invested in services coming into the business premises then it may be that a surety bond is more appropriate on this occasion. However, if you’re doing a business deal between two parties and want to guarantee payment, a bank guarantee may be more suited. Again, it’s going to depend on the exact circumstances and requirements. You can look at guarantor loans online but they might not be tailored to your individual or business needs for the moment. If you’re unsure, get some advice from a professional.

Choose Your Security Wisely

Businesses have to protect themselves at every turn, because you never truly know what’s out there. You don’t know if the person you go into agreement with will fail to deliver on its goods or services, or what it promises. Also, you can’t be sure if the third party entering your business to do some simple installations will cause thousands of dollars worth of damage. It’s about protecting yourself. You don’t want to be liable should something go wrong. Have the best protection and while guarantor loans might seem useful, you have to look at all options from surety bonds to bank guarantees. For more information visit: https://en.wikipedia.org/wiki/Unsecured_guarantor_loan