Bank Guarantees are issued from a bank for surety against loss in a future or proposed transaction. In essence, what a BG does is guarantee a payment on behalf of the owner of the instrument.
How do you get a BG at a discount? Let's start with the basics of issuing a BG. To receive a BG from a top world bank you have to have the financial capability or the funds in the account to receive it. What that means is you need 100 million dollars in the bank to received the 100 million dollar BG. Just because you have the said amount of funds in the bank does not mean you are going to receive it. Most of the clientle using BG's have had a long term relationship with their bank and other business transactions in which the bank will feel comfortable issuing the BG. What the instrument is used for is a performance bond of sort in bulk commodities and real estate transactions.
With all of that said, how do you get a BG at a discount? We have heard story after story of buyer so and so wanting a BG at 80 percent of face value? Why would a bank or owner discount a one year instrument for a buyer to wholesale money to them? The answer is - they wouldn't. If you took the numbers you would see how ridiculous this is; so what we are going to do for you in the next article? We are going to show you the numbers and why no one is going to issue a discounted BG.