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Bank Guarantee/Performance Bond

Definition of 'Bank Guarantee'



A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it.

A bank guarantee enables the customer (debtor) to acquire goods, buy equipment, or draw down loans, and thereby expand business activity.


Definition of 'Performance Bond'



A performance bond is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor or a assurance to the Seller or Buyer for the performance of the trade.

A performance bond is either backed by cash or insurance.