Cost of Leasing a Bank Guarantee
Bank guarantee price or the cost of leasing a bank guarantee.
The average cost to lease a Bank Guarantee is between 12 and 13 percent per year.
The cost to a company for entering into a Collateral Transfer Agreement or “leasing” a Bank Guarantee will depend on the portfolio of the Provider and the subsequent strength of The Issuing Bank. It’s worth noting, a Bank Guarantee does not carry a rating. On average, the company or Beneficiary can expect to pay a fee of 6% of face value on a Bank Guarantee, (Collateral Transfer Fee), with an expiry date of one year.
The Collateral Transfer fee is not the only cost the company beneficiary will have to bear. If the Bank Guarantee is for monetisation purposes, they will have to take into account the interest rate that will be charged by the lender.
Further charges such as legal costs for contracts, due diligence and arrangement fees will also be incurred by the beneficiary company.
Collateral Transfer Agreements are not cheap, and a company can expect to pay, if utilising Euros or Pounds Sterling, a cost in the region 12 – 13% to lease a Bank Guarantee in year one. If the company wishes to rollover a Bank Guarantee into the second year, then the cost will be the Providers’ collateral fee and the loan interest.
Even though Bank Guarantees can at first appear costly, their purpose is to provide access to cheaper loans, capital injections and credit lines for companies who are being denied access to these credit facilities by traditional financiers.
If your company has been refused a loan, credit line or capital injection then Collateral Transfer offers an excellent opportunity to obtain the funding that you require.
If you have any further questions on this or any other subject related to bank guarantees, then you can search our frequently asked questions where you will hopefully find the answer you are looking for. Alternatively you can ask us a question and we will answer it for you.
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