Let’s know about it in detail with the example.

The payment bank guarantee usually assures the seller that the amount involved in the trading will be paid on the mentioned date in the guarantee. The advance payment guarantee acts as the collateral for reimbursing advance payment from the buyer. Usually, the credit security from the lease BG SBLC providers serves as the collateral for repaying the loan.

Let's say that Company A is a new restaurant and wants to buy $3 million in kitchen equipment for the restaurant’s growth. The equipment vendor will usually ask Company A to provide the Bank Guarantee (BG) to cover the payments before they ship the required kitchen equipment to Company A. At this time, company A will request the bank guarantee from the financial institution where they have the bank account. The bank will carry out the background check of the client and then offer the bank guarantee to them. Usually, the bank will offer the bank guarantee within a week or two from the date of application.