It replaces the need to provide other forms of security (such as a cash deposit), as the beneficiary knows they will be paid.
The security (such as a cash deposit) can be invested in an interest-bearing account.
As the beneficiary relies on the guarantee, the transaction can proceed.
Indicates the business standing of the Applicant as FNB is willing to underwrite their obligations.
It removes the admin burden of getting the beneficiary to return security that has been provided.
As a minimum, the following parties are involved
Beneficiary
The party who relies on the guarantee as security against the risk of non-performance/default by the applicant
Applicant
The party applying for the issuance of a guarantee to cover the risk of their non-performance/default
Guarantor
The party who issues a guarantee on behalf of the applicant
