Trade finance

Bank Guarantee

A BANK GUARANTEE is a comprehensive international payment instrument that can reduce the risks faced by importers and exporters in the purchase and sale of cross-border goods, products and services. The exporter is able to receive payment after the shipment of goods under the Guarantee and shall have the right to claim payment from the Guarantor Bank in case of insolvency of the importer.

Domestic Bank Guarantee

Any procurement of goods and services financed by the state budget of Mongolia, typically require three types of bank payment guarantees. The Transport and Development Bank issues those guarantee services to the beneficiaries. These include:

Bid Bond
Performance Bond / Security
Advance Payment Guarantee

Payment Guarantee

In a business relationship, the parties are obliged to fulfill certain obligations under the contract, and in the event of failure to perform its obligations. The payment guarantee ensures the performance of the all parties in accordance with the terms and condition of the signed contract.

Advantages of the Bank Guarantee

Key advantages for the importer:

Reduce the risks of international trade across different countries
Lower cost
Allows importer to avoid the advance payment or reduce the amount of advance payment (improving cash flow)
To conduct the business in accordance with its plan while controlling all process including loading and transportation of goods.
Assure the importer’s credibility to the exporter side
The exporter can get payment as soon as the goods are shipped while the importer can pay after receiving the goods.
Lower cost enables the importer to increase their trade turnover.

Key advantages for exporter:

The exporter may receive payment after the goods are shipped, but the payment risk is very low because the importer’s payment risk is guaranteed 100% by Bank.
The definite payment date allows the exporter to manage its cash flow effectively.
If exporter fails to receive payment on due date from importer, exporter has full right to provide demand to the Guarantor bank and payment shall be received within 5 banking days in according to the International Banking Practice.
You can transfer importer’s payment risk to your country’s any bank and able to receive payment from your account bank.

Bank Guarantee – Process Flow

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Fees and Commission

BANK GUARANTEE	Fees and commission
Guarantee, standby LC risk premium (non-cash covered)	2% – 4% (annual)
Issuance of guarantee, standby LC	USD 100.00
Amendment to extend or increase guarantee, standby LC amount	USD 30.00
Amendment on terms and condition	USD 30.00
Checking of document and payment of claim made under the guarantee, standby LC	USD 50.00
Cancellation of guarantee, standby LC by request of the customer	USD 50.00
Adding confirmation on standby LC	1% – 3% (USD 300)
Advising of bank guarantee, standby LC	USD 20.00
Advising of amendment to terms and condition	USD 10.00
Inquiries by request of the customer	USD 10.00

Financial advice

We are keen to work together to provide you with valuable financial advice and bring your business up to international business standards, from the time that you sign a trade agreement until receive your goods as an importer and receive payment as you sell your goods as an exporter.