bank guarantee

noun

Definition of bank guarantee 

: a statement issued by an importer's bank guaranteeing the payment of drafts to the exporter

Love words?

You must — there are over 200,000 words in our free online dictionary, but you are looking for one that’s only in the Merriam-Webster Unabridged Dictionary.

Start your free trial today and get unlimited access to America's largest dictionary, with:

  • More than 250,000 words that aren't in our free dictionary
  • Expanded definitions, etymologies, and usage notes
  • Advanced search features
  • Ad free!

History and Etymology for bank guarantee

bank entry 4

Keep scrolling for more

Learn More about bank guarantee

Share bank guarantee

Statistics for bank guarantee

Look-up Popularity

Keep scrolling for more

More Definitions for bank guarantee

bank guarantee

noun

Financial Definition of bank guarantee

What It Is

A bank guarantee is a promise from a bank or other lending institution that if a particular borrower defaults on a loan, the bank will cover the loss. Note that a bank guarantee is not the same as a letter of credit.

How It Works

Let's assume Company XYZ is a small, relatively unknown restaurant company that would like to purchase $3 million of kitchen equipment. The equipment vendor may require Company XYZ to provide a bank guarantee in order to feel more confident that it will receive payment for the equipment it ships to Company XYZ.

To obtain this bank guarantee, Company XYZ requests one from its preferred lender (usually the bank with which it keeps its cash accounts). The lender provides the guarantee in writing, which is then passed on to Company XYZ and its vendor. Company XYZ's lender essentially becomes a co-signer on the purchase contract with the vendor.

Why It Matters

A bank guarantee enables companies to make purchases that they would otherwise not be able to make; these guarantees thus serve to heighten business activity and expand entrepreneurial activity.

Source: Investing Answers

Comments on bank guarantee

What made you want to look up bank guarantee? Please tell us where you read or heard it (including the quote, if possible).

WORD OF THE DAY

the figure or shape of a crescent moon

Get Word of the Day daily email!

Test Your Vocabulary

Late Autumn 2018 Words of the Day Quiz

  • frosted-autumn-leaves
  • Which is a synonym of yahoo?
Name That Thing

Test your visual vocabulary with our 10-question challenge!

TAKE THE QUIZ
SCRABBLE® Sprint

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!