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Managing risk

Bonds, Guarantees & Standby Letters of Credit

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Bonds explained
Types of bonds
Application requirements
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Security may be required. Product fees may apply. Over 18s only. Subject to status, business use only. Any property or asset used as security may be repossessed or forfeited if you do not keep up repayments on any debt secured on it.

What are bonds & guarantees, and standby letters of credit?

Bonds & guarantees, and standby letters of credit, provide companies with additional protection in respect of their business or customers, performance or financial obligations. We can issue guarantees on your behalf or receive and validate guarantees issued by other banks in your favour.

What's right for you?

The terms of your contract will determine whether you need a guarantee or a standby letter of credit. Read the below to ensure you know which product is best for your business

Bonds & Guarantees

  • Provides a purchaser the security of a guarantee if there is a failure by the seller to meet its contractual obligation.

Standby Letters of Credit

  • To pay a beneficiary based either on their written demand certifying non-fulfilment of contracted terms or against stipulated documents.
  • Operates similar to a Bank financial guarantee, with the main difference being that it is governed by the current version of UCP or ISP98

 

Benefits of Bonds, Guarantees and Standby Letters of Credit

Provides security

Gives your supplier confidence that you can meet your financial commitments

Safe and efficient

Provides a safe and efficient way of mobilising the working relationship between overseas trading partners.

Payment protection

Gives you protection against non-payment risk

Pick the right type of Guarantee for you

There are a wide range of different Bonds and Guarantees that can be issued depending on a customer’s specific requirements. They can be either performance related, to cover failure to perform under a contractual obligation, or they can support a financial obligation. 

Bid or Tender Bond

Issued by the supplier in support of a contractual tender.

Performance Bond or Guarantee

Issued by the supplier in order to support their performance obligations under the commercial contract.

Advance Payment / Prepayment

Issued by the supplier when the buyer has provided a down payment for the supply of goods or services.

Payment

The supplier receives a Guarantee from the buyer to support their financial obligations under a commercial contract.

Customs Bonds / Custom Duty Deferment Guarantee / H.M. Customs & Excise Guarantee

This allows a company to defer payment of duty or tax.

FAQs

What you need to know before applying

If you're applying for one of the following bonds or guarantees: Performance, Bid/Tender, Advance Payment, Warranty, IATA & ABTA/CAA, Trade Debt, Retention, Rental or a Standby Letter of Credit, you may need the following to hand:

  • The amount and currency of the Guarantee or Bond you are applying for
  • Your Guarantee wording as a DOC, DOCX or PDF (if not using standard RBS wording)
  • The account details to be used for charges
  • Your tender or contract number, start and end date (not required for IATA & ABTA/CAA or Rental)
  • Expiry, renewal date or any events which will cancel the guarantee (not required for IATA & ABTA/CAA and HMRC)
  • Documents required in the event of a claim (Standby Letters of Credit only)
  • Payment terms (Standby Letters of Credit only)

HMRC CCG2 and HMRC Other

In addition to the requirements on the left, you will also need:
  • Engage with HMRC to ensure you present them with the right type of guarantee for your business. Please see guidance here.
  • The potential and actual debt limit you have agreed with HMRC
  • The applicable EORI number and CCG1 form (CCG2 bond only)

On average, applications will take around 20 minutes to complete. Application progress can't be saved, so please complete in one sitting.

Ready to apply

To apply online for a Bond, Guarantee or Standby Letter of Credit, you must be an existing RBS Business Customer. If you don't have an account with us, find out how to apply over the phone below.

Please note: Your Relationship Manager should have confirmed you have a credit line in place to support these facilities before applying online. 

Bonds and Guarantees

Apply online

Standby Letters of Credit

Apply online

If you’re a new customer with an annual turnover of less than £2 million, you can give us a call on 0345 050 1422. If it’s over £2 million, call us on 0345 050 1423. 

Customers with hearing and speech impairments can contact us by using our Relay UK Service: 18001 0345 050 1422 if your turnover is less than £2 million and 18001 0345 050 1423 if it's over £2 milion.

For more information on accessibility visit: https://www.business.rbs.co.uk/business/accessibility.html

Calls may be recorded for training and monitoring purposes.

To see how much your call might cost, visit the call charge information page.

Factsheet

Bank Guarantees (also referred to as bonds or Standby Letters of Credit) provide both buyers and sellers in a trade transaction with reassurance that either performance or financial obligations will be met. We can issue guarantees on your behalf or receive and validate guarantees issued by other banks in your favour.

Other Trade Finance options

We offer a wide range of trade finance products, discover how these could help out with your business needs…

Letters of Credit

Provide a secure method of settlement and reduce the risk of non- payment for delivered goods. Once issued they are legally binding, irrevocable and cannot be cancelled unless all parties agree.

Documentary Collections

Documentary collections provide a secure way to make and receive payments during international trade.

Trade Loans

Trade Loans tailor loans to a specific contract(s) and cover the funding gap between you paying your suppliers and being paid by your customer. They allow you to repay the loan when your customer pays you and are available to businesses with a turnover of over £2m.

To compare all of our Trade Finance products, see our Trade Finance Homepage

Additional support for your business

Managing Risk

Help protect against the impact of exchange rate fluctuations and the risk of not being paid

Managing risk

MaxTrad

Our secure online platform lets you manage your international trade transactions from anywhere, 24 hours a day

MaxTrad

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