Business Overdrafts
Be financially flexible with a business overdraft.
Guarantees, Bonds, Indemnities & Standby Letters of Credit
What is a Guarantee?*
Guarantees offer protection to your international or domestic trading partner by providing the bank's agreement to pay an amount of compensation if you fail to deliver on your contract.
Where your customers are less familiar, winning new contracts can be difficult without assurance you will perform as contracted.
We can help by providing a Guarantee when required by the terms of your contract, whether your trade partner is in the UK or abroad.
*Any reference to Guarantees also applies to Bonds, Indemnities and Standby Letters of Credit
The benefits of using a Guarantee
Types of Guarantees
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UK Export Finance (UKEF) Short Term Schemes
Flexible government backed support is available for UK based exporters. We have provided some details of these initiatives, please get in touch for any questions you may have about eligibility.
UKEF Bond Support Scheme
- Strengthen your ability to bid for new contracts with a bond Guaranteed by the UK government.
- UKEF can typically Guarantee up to 80% of the Guarantee.
- A UKEF-backed facility can be used in addition to your existing bank facility.
UKEF General Export Facility
- Supports your export business to free up working capital
- Helps to fulfil multiple export contracts, ease cash flow constraints and to scale up your export business.
If you’re unsure which Guarantee you or your buyer might need, we’ve identified common types and provided simple explanations.
Tender Guarantee (Bid Bond)
Compensates the buyer/beneficiary if tender is withdrawn or the supplier declines to sign contract. The typical value of the Guarantee against the overall contract value is 2-5%.
Performance Guarantee
A Guarantee against failure to perform an agreed contract. Typically, 10-20% of contract value.
Advance Payment Guarantee
Provides comfort to the buyer/beneficiary of repayment of advances if the supplier fails to perform in line with the agreed contract. Typically, 10-40% of contract value.
Retention Monies Guarantee
Provides security to the buyer that if they release the final payment due under the contract in advance of the retention period, they will receive compensation if the seller fails to perform in the final stage of the contract. Typically, 5-10% of contract value.
Standby Letters of Credit
Standby Letters of Credit perform the same function as Guarantees and are most widely used when trading in the United States.
Warranty Bonds
Provide security to the buyer/beneficiary that the goods or services supplied will perform as per the contract under the specified warranty terms. If they do not, the Guarantee can be called on by the beneficiary.
Customs and Excise Guarantees
Allow you to defer payment of duties owed to HMRC and foreign tax authorities or allow the transit or warehousing of goods in approved premises.
Why choose Lloyds Bank?
Get in touch
To discuss Guarantees with a specialist, call 0345 835 5722.
Lines are open 8.30am to 5.30pm, Monday to Friday, except public holidays.