Bank Guarantee For Funding Projects
Project owners can apply for lines of credit with their own bank to support the financing of their project. Normally the credit line needs to have some collateral backing it, which is where a bank guarantee letter (BG) can come into play. There are options for project owners to either buy or lease the bank instrument. A bank guarantee such as an SBLC is backed by collateral for one year and one day. The corporation who provides the collateral then becomes the ‘Provider’ of the SBLC. You can use the leased SBLC for 366 days and then decide whether or not you want to renew the lease? Renewals are not a given and are offered on a case by case basis. If the bank guarantee isn’t renewed, then it has be returned unencumbered and free of any liens.