Bank Guarantee an Extraordinary Thinking

A guarantee is a superior thing, right?. Everyone likes the thought that they have some sanctuary in life. There are many types of guarantees (bank guarantees, loan guarantees, product guarantees, promises, etc.), but product guarantees are one of the most common. Over time, consumer abuse and fraud has led to consumers wanting an agreement on the products or services they collect. Merchants and producer became very good at producing large amounts of harvest at cheap prices, and often cheap quality.

The term trade or business generally includes any activity conducted for the construction of income from selling goods or performing services. An action does not lose its personality as a trade or business merely since it is conducted within a larger group of related activities that may or may not be associated to the exempt purposes of the association.

Product Guarantee:-

Since Trade Business totally depends on the export and import of goods and services so one must need a bank guarantee on it. Many times it is so happens that the quality of goods or services at the manufacturing time is the best and prove to be best after going through all the quality assurance testing process, but in  transferring process these products get damaged and importer has to face a large financial problem.

Consumers spend their hard-earned funds on products and services that they believe are valuable, but intermittently they receive a poor product. But, it is not actually the poor product that is the main question, it is the reaction of the producer, vendor or retail chain that has led to the requirement for a product guarantee. Dishonest vendors took advantage of people, and the market's response is  the need for a guarantee.

Payment Guarantee:-

Any kind of Business whether it is small or large not fully depends on trust .One must need a guarantee, especially in trade finance where transactions should be done overseas. Exporters need a guarantee from an importer that he/she pays his full amount on time. Many times it is so happens that  in a middle of transactions one of the parties fails to complete his transactions, and other has to face a lot of damage to his business.

How to Overcome from it:-

One must need to put a third party view on all the process from manufacturing to submit. Mostly Banks act as a third party and provides all types of guarantees. Before signing a deal  exporters or importers develops a complete  rules and regulations related to his transactions both physical or financial transactions also known as a letter of credit credentials, and submit it to a bank to watch on all the procedures deeply.

Then banks deeply examine all the documents and if any manipulations require bank will put in front of both the parties. After that bank except for to give a guarantee. Then in future if any illegal process or damage of rules and regulations occurs Bank will pay for it. Letters of credit are typically required by overseas suppliers in an attempt to mitigate some of the risks associated with trading on open account terms.

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Created on Dec 31st 1969 18:00. Viewed 0 times.

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