What is the Process of Getting a Loan against a Bank Guarantee?

What is a Bank Guarantee? A Bank Guarantee is a financial instrument issued by a bank. The issuing bank is legally obligated to pay the beneficiary. Payment is made if the applicant fails in their contractual and financial obligations. 

So why get a loan against a Bank Guarantee? This is big business in today’s markets. Companies are turning in droves to Bank Guarantees to obtain loans and credit lines. As we know banks have been slashing their loan books for years. Companies are finding it harder and harder to obtain credit facilities. In fact, one huge American banks’ loan book has remained static for 12 years whilst deposits have increased exponentially. 

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What Type of Bank Guarantee is Utilised for Loans and Credit Lines? 

There is only one Bank Guarantee that can be used to obtain loans and lines of credit. It is the Demand Bank Guarantee. The Demand Bank Guarantee is specifically utilised for monetisation purposes. It is governed by ICC Uniform Rules for Demand Guarantees, (URDG 758) and is payable on first demand. In other words, banks and other lenders are happy to lend against a Demand Bank Guarantee. 

How Does a Company Obtain a Demand Bank Guarantee? 

Here in Switzerland, there are a number of companies that provide access to Demand Bank Guarantees. Leading the way with an enviable reputation is IntaCapital Swiss SA, Geneva. They have successfully been providing access to loans and lines of credit for over a decade. 

IntaCapital Swiss have an extremely popular financial model, the Collateral Transfer Facility. This facility makes use of “Leased” Demand Bank Guarantees. IntaCapital Swiss have a database of providers. Providers are companies that “lease” Demand Bank Guarantees. These companies are recognised as Sovereign Wealth Funds, Hedge Funds, Private Equity Funds and senior Family Offices. 

The Collateral Transfer Facility provides for a contract between the provider and the company obtaining the Demand Bank Guarantee. This company is referred to as the beneficiary. The provider and the beneficiary will sign a Collateral Transfer Agreement. Once signed the provider will request their bank to transmit a Demand Bank Guarantee to the beneficiary’s bank. 

Obtaining a Loan or Line of Credit Against a Demand Bank Guarantee  

Ideally, the beneficiary of the Demand Bank Guarantee will have negotiated a credit line prior to the instrument’s issuance. These facilities are referred to as Credit Guarantee Facilities which can be loans or lines of credit. 

The beneficiary will offer the Demand Bank Guarantee to their bankers as collateral against a loan or line of credit. As mentioned above, many banks have slashed their loan books. What happens if the beneficiary’s bankers reject the loan application despite being offered first class security? 

Happily, IntaCapital Swiss have a solid portfolio of third-party lenders. These are lenders who are quite prepared to lend against a Demand Bank Guarantee. They will step into the breach if the beneficiary’s bankers reject their loan application. 

Note: Are you a company whose credit applications have been rejected. Then your next move is to utilise a Demand Bank Guarantee to obtain a loan or line of credit. I can tell you that here in Switzerland Demand Bank Guarantee applications are going through the roof. I suggest you contact IntaCapital Swiss without delay. 

For more information on IntaCapital Swiss SA, Geneva please go to www.intacapitalswiss.ch