Author: Batbayar

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

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. 

Key advantages for the importer: 

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

Key advantages for exporter: 

1. 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.
2. The definite payment date allows the exporter to manage its cash flow effectively.
3. 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. 
4. You can transfer importer’s payment risk to your country’s any bank and able to receive payment from your account bank. 

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