In large commercial transactions, risks are always inevitable. An advance payment guarantee is the solution to help businesses minimize this risk. So, what is an advance payment guarantee? Let's explore the definition, role and benefits of an advance payment guarantee so you can feel more secure when participating in large transactions.

What is an advance payment guarantee?

An advance payment guarantee (Advance payment guarantee) is an essential financial tool in the modern economy, acting as "insurance" for commercial transactions, especially large-value contracts. Thanks to the guarantee, businesses can rest assured to make advance payments without worrying about the risk of partners breaching the contract.

Advance payment refund guarantees are often used in the construction sector

What is the role of advance payment refund guarantees?

The main role of advance payment refund guarantees includes:

Ensuring that the parties in the advance payment refund guarantee enjoy their rights, fulfill their obligations, and ensure the progress and results of the contract.
Risk prevention: The guarantee helps the beneficiary minimize the risk of financial loss due to the guaranteed party's breach of contract, thereby protecting their economic interests.
Enhancing reputation: The use of guarantees demonstrates the professionalism and reputation of the business in commercial transactions, contributing to increasing cooperation opportunities with potential partners.

Parties involved in advance payment guarantees

Advance payment guarantees usually involve three main parties:

Guarantor: Usually a financial institution or a bank.
Principal (Guaranteed Party): An individual or organization participating in economic contracts and receiving the guarantee from the bank or financial institution.
Beneficiary: The individual or organization entitled to claim the guarantee issued by the financial institution or bank.

Conditions for an advance payment guarantee to be valid

To issue an advance payment guarantee, the basic and important conditions usually include:

A precise and clear contract: An advance payment guarantee usually requires a precise and clear contract between the parties, which clearly stipulates the receipt and use of the advance payment.
Meet the Guarantor's standards: The Guarantor (usually a bank or a guarantee company) will assess and require the guaranteed party to meet certain standards, such as financial, reputational and ability to fulfill the commitment.
Complete legal procedures: Relevant legal documents and papers such as guarantee issuance request, commercial contract, other documents must be prepared and provided as required by the Guarantor.
Meet the conditions for advance payment/deposit (if any): If the original contract has provisions on advance payment/deposit, the parties must ensure that they have provided the appropriate amount of advance payment/deposit and in accordance with the law.

The above conditions help ensure that the advance payment guarantee is implemented in accordance with the law and the contract, protecting the interests of both the applicant and the guaranteeing organization.

The effectiveness of the advance payment guarantee depends on the main contract

How much is the advance payment guarantee fee?

The advance payment guarantee fee is usually agreed upon by the parties and can vary based on many factors. Here are the main factors that affect the guarantee fee:

Amount of guarantee: The guarantee fee is usually calculated based on a percentage (%) of the guarantee value, i.e. the total amount that the Bank will have to pay if the guaranteed party fails to perform its commitment.
Risk level: Banks can assess the risk level of the transaction and apply the corresponding fee. Transactions with a higher risk level usually have a higher guarantee fee to compensate for the risk.
Term of guarantee: The duration of the guarantee can also affect the guarantee fee. The fee can vary based on the guarantee period, for example, short-term or long-term guarantee.
Agreement between the parties: The final guarantee fee is decided by agreement between the Bank and the guaranteed party. The parties can negotiate to reach a reasonable and fair fee.

Normally, the advance refund guarantee fee can range from about 1% to 3% of the guarantee value. However, sometimes it can also be higher if the transaction is more complex or risky. Therefore, to know exactly about the advance refund guarantee fee, the parties often need to consult and negotiate with the Bank to clearly understand the specific terms and related costs in each specific case.

The advance refund guarantee fee will depend on the agreement of the parties involved

Where should I use the advance refund guarantee service?

Advance payment guarantee is an essential financial tool that helps businesses feel secure in making advance payments in commercial transactions, especially large-value contracts. However, choosing a reputable and guaranteed guarantee service provider is extremely important.

If you are looking for a reputable address to use the advance payment guarantee service, SeABank is the top choice you can consider. SeABank is proud to provide a professional advance payment guarantee solution, meeting all business needs. With a team of experienced specialists and a quick approval process, SeABank is committed to providing a fast, convenient and cost-saving guarantee service for customers.

Choose SeABank to protect your investment with:

Top reputation: SeABank is one of the leading prestigious banks in Vietnam, trusted by many businesses and individuals.
Diverse products: SeABank offers many guarantee packages suitable for the needs and financial capacity of each business.
Competitive guarantee fees: SeABank always applies the most competitive guarantee fees on the market, helping businesses save costs.
Professional services: SeABank's team of experts is always ready to support customers 24/7, answer all questions and guide customers to use the service most effectively.

SeABank is providing advance payment guarantee with competitive fee

Hopefully with today's detailed article, you have a better understanding of what advance payment guarantee is. Don't forget to contact SeABank immediately at website https://sme.seabank.com.vn/ or Hotline 1900.599.952 (KHDN) for advice and experience of advance payment guarantee service from SeABank.

SeABank is confident in providing professional advance payment guarantee solutions, meeting all business needs. With a team of experienced specialists and a quick approval process, SeABank is committed to providing fast, convenient and cost-saving guarantee services for customers.