Monetising a Bank Guarantee
Monetising a Bank Guarantee.
The monetisation of a Demand Bank Guarantee is a form of asset based lending. The monetisation is subject to the (LVT) loan to value rate that was applied prior to receiving it. This means that a 10 million Euro BG with a 90% LTV can me used to raise a line of credit up to 9 million Euros.
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If a company wishes to Monetise a Bank Guarantee in order to receive a loan or credit line, referred to as Credit Guarantee Facilities, the wording must be specific to that of a Demand Bank Guarantee. Monetising a Bank Guarantee is governed by ICC Uniform Rules for Demand Guarantees, (URDG 758), and is used for monetising.
A Demand Bank Guarantee will allow the Beneficiary to confidently approach their bank, utilising the Bank Guarantee as security. This will allow them to apply for a capital injection, straight bank loan or a line of credit, referred to as Credit Guarantee Facilities.
The Beneficiary should negotiate the details of loan or a credit line with their bank or lender, such as the LTV (Loan to Value) prior to receiving the Bank Guarantee on their account, confirming the wording of the Bank Guarantee is acceptable. The LTV value is important as it defines the maximum value of the line of credit that can be raised against it. We have a demand bank guarantee calculator to help define the value of bank guarantee required to rais the line of credit you require.
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