Advance Payment Guarantee, which is issued by a particular provider bank, is a form of security for recovery of the payment made in advance by a buyer/developer under a contract or purchase order if the supplier fails to fulfill its contractual obligations, unable to comply with the terms & conditions which govern the procurement of a specific merchandise or service or fall short in supplying the goods/merchandise specified on their sales & purchase agreement.
It can be utilized in various situations, mostly in import & export trade deals. The APG can also be used in domestic business deals, for example; procurement of heavy machineries/equipments or huge quantity of commodities and construction projects. Advance Payment Guarantee allows the exporter/supplier to collect down payment as per their contract, as well as for the buyer/developer to be protected in case of default or problem under the period of the signed contract.
Whenever a buyer enters in a business deal to procure merchandise, they may be required to pay a certain percentage of the contract value in advance. And at the same time, buyer requires some sort of security in case if the supplier by any reason were not able to fulfill their commitment to them. In some instances, if the supplier asked for a down payment before delivering of the ordered goods and they consequently fails to deliver the merchandise, the Advance Payment Guarantee will come enforce. The buyer can then claim a reimbursement of their advance payment as the deal can be assumed as cancelled. The APG ensures the buyer/party does not incur a loss of any money paid in the trade deal. However, it does not give any compensation on the possible profit that a buyer may have lost if the merchandise were not delivered.
It is very important to pay close attention to the particulars of the guarantee, in view of the fact that it is also possible to deny a reimbursement of the advance if the supplier faces certain circumstances beyond their control that made it impossible to comply with all conditions of the agreement made to supply the commodities on time. This could happen due to any unforeseen reasons or any natural disaster.
The same will apply when a developer assign a construction group or company to administer the building/construction of their project. If the contractor fails to fulfill the conditions of the agreed contract, then developer can terminate the contract and claim their advance down payment under the issued payment guarantee. In some cases, developer may still be asked to compensate for any service that has already been provided, or the contractor will be obliged to take in those losses in their job tenure and pay a complete reimbursement of the payment made in advance.
BWT is a direct provider of an APG from Top European Banks for their clients to obtain advance down payment from their buyers/developer.
To get Advance Payment Guarantee, please follow the below procedure:
1. Seller/Contractor presents their trade deal requirement by submitting contractual agreement or buy and sell agreement.
2. BWT will do due diligence on the trade transaction between importer/developer & seller/contractor and informs the concerned party if the APG request is rejected or approved.
3. If approved, BWT will ask their client to submit further documents and payment being their APG charges.
4. Upon receipt of documents and APG charges, BWT will proceed right away and will establish the Advance Payment Guarantee from their bank account with European Bank via authenticated swift MT-760 to the importer/developer’s bank.