Chapter 35: Credit Substitutable Facilities

Question 1

Credit substutable facilities: bank guarentee

Answer 1

Bank can provide a bank guarentee to a creditor as security
Creditor is sure to get money back
Creditor must initiate the calling of the guarentee

Question 2

Other guarentees

Answer 2

* Customs Guarentee: Customs service will only release goods after duties have been paid, tax collector is providing a form of credit
** Guarantee for Payment of Tax:** Used for income and corporation tax, allowing deferred payment with a bank guarantee.
Bid Bond: Ensures contractors can honor their bids, typically 2-5% of the bid amount.
* Maintenance Bond: Effective upon completion of work, securing maintenance and guarantee obligations.
* Performance Bond: Guarantees satisfactory completion of work or supply of goods, usually 5-10% of the transaction amount.

Question 3

Bill guarentee

Answer 3

A suretyship contract is a guarantee where a third party (the surety) agrees to pay the debt if the debtor defaults, similar to a bank guarantee but dependent on the primary obligation. The most common example in banking is a bill guarantee, where the bank guarantees payment if the debtor fails to pay.