Letters of guarantee and reference

Letters of guarantee

A letter of guarantee is a surety bond in which the bank unconditionally pledges to pay a beneficiary (which may be a government agency or organization or one or more private individuals or corporate entities) a stipulated amount under stipulated terms and conditions in the event that a contractor (the principal) fails to fulfill some specified contractual obligation or duty.

Features

• For the principal, a letter of guarantee issued by a reputable bank demonstrates his credibility to the beneficiary before the start of the work.
• For the drawee, a letter of guarantee ensures his compensation if the work is not satisfactorily carried out.

Letters of reference

Letters of reference are generally provided to loan customers who are active in construction and contracting. A reference letter is issued at the firms request by the headquarters unit concerned and delivered to a designated recipient. Reference letters may be issued in terms of TL or a FX.