A bank guarantee, also commonly referred to as a letter of guarantee, is a legally binding obligation to pay should the applicant fail to honour their financial and contractual obligations to the beneficiary. A Bank Guarantee received under Collateral transfer facilities may be used to secure lines of credit.

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The Guarantees that are issued under these types of facilities are worded specifically to secure credit lines. Guarantees are issued under URDG protocols and are readily accepted by most mainstream banks. They are referred to as a ‘letter of Guarantee’, ‘credit facilities Guarantee’ Correctly, they are called ‘Demand Guarantees’.

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To lease a Bank Guarantee two parties, enter into a contract; a Collateral Transfer Agreement. One party (the Provider) and owner of the asset, will transfer the Bank Guarantee to another party (the Beneficiary) for a limited period of time – usually one year.

The ownership of the asset then reverts to the provider on the expiry of the Bank Guarantee. The Beneficiary will pay the Provider a ‘Contract Fee’ in payment for the use of their asset. On receipt of the Bank Guarantee, the Beneficiary is free to approach their bank and apply for a line of credit or bank loan, (alluded to as Credit Guarantee Facilities), utilising the Bank Guarantee as security. The Beneficiary must ensure all loans and credit lines are repaid before the expiry of the Bank Guarantee.

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A Provider is a party who enters the Collateral Transfer Contract (or the Collateral Transfer Agreement, “CTA”) with the Principal or Recipient. A Provider will typically be a private equity firm, a hedge fund or wealth manager, or indeed a family office, managing funds on behalf of their clients or investors.

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IntaCapital Swiss can assist their clients in raising credit against Guarantees of this type in the event that the client’s own bank declines to offer lending facilities. We hold strong relationships with understanding banks and private equity groups that look to expand lending opportunities in this area. It should be noted however that additional fees will apply if you utilise our services to obtain credit lines. IntaCapital can also assist with the opening of banking and lending facilities for its selected clients by a direct introduction to an appropriate bank.

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