What is a Bank Guarantee “Lease” and How Does it Relate to Collateral Transfer?

Before going into the details of a Bank Guarantee “lease” (or indeed, a so-called ‘leased’ Bank Guarantee), we should first define a Bank Guarantee. A Bank Guarantee is a Demand Guarantee (or bankers Letter of Guarantee) issued by a bank upon instructions received from their customer. The issuing bank is legally bound to pay the Beneficiary of a Guarantee if the Applicant (their customer) fails in their fiduciary or contractual duty. The legalities of a Bank Guarantee are virtually the same both here in Switzerland and in other major financial centres. 

Does a “Leased” Bank Guarantee Differ from a Collateral Transfer facility?

Yes. The term “Leased” Bank Guarantee is not a correct financial term. Leased Bank Guarantee will not be found in any financial reference books. The fact that under a Collateral Transfer facility, the applicant effectively receives investment via the medium of a Bank Guarantee and therefore has to undertake to return it, mirrors only closely the process of a commercial lease. 

Financial historians suggest the word Leased comes from a Commercial Leasing Contract. Both the Leased Bank Guarantee contract and the Commercial Leasing Contract have many similarities. 

Whilst the term “Leased” Bank Guarantee is not a real financial term it is often used in ‘broker-speak’ and slang, particularly by untrained persons searching the internet for funding facilities. It has been used on a day-to-day basis for many years online, albeit incorrectly.  

“Leased” Bank Guarantee(s) and Collateral Transfer  

We have established that a “Leased” Bank Guarantee facility and a Collateral Transfer are in effectively similar in as much as those seeking ‘leased’ bank guarantees are in affect seeking the same facility .  

So how does a company go about “leasing” a Bank Guarantee and why would they need a “Leased” Bank Guarantee? Moreover and more correcly, how does a company seek to acquire a Collateral Transfer facility? 

In this day and age banks have drastically reduced their loan books. Indeed, one top American Bank has not increased their loan book for 12 years. Meanwhile their deposits have grown exponentially year on year. This is endemic across the banking world. 

Please find more information here.

Therefore, to access loans or lines of credit one of the best options is to lease a Bank Guarantee. Company’s needing this service must seek companies that are experts in this field. Here in Switzerland, we have one of Europe’s leading experts on ‘leasing’ Bank Guarantees.  

IntaCapital Swiss, SA, Geneva is a boutique finance house. They have been providing access to loans and lines of credit for over a decade. Their highly popular Collateral Transfer Facility utilises Bank Guarantees in these types of facilities. IntaCapital Swiss has an impressive provider stock for the Collateral Transfer market. 

Under these types of facilities, once a  Bank Guarantee has been received to the Beneficiary’s account, they can obtain a loan or line of credit, dependant upon its wording. This they do by offering the Bank Guarantee as security to their bankers, albeit on an indirect basis, utilising various other methodologies and strategies embedded into the Collateral Transfer facility. 

For more information on IntaCapital Swiss SA, Geneva, please visit www.intacapitalswiss.ch