What is letter of guarantee?

[Good-Person]

A letter of guarantee is a kind of letter which is issued by the bank on behalf of the customer or the person who tends to purchase products from a company or person located in a different country. It basically offers "guarantee" that the seller will receive their money.

 

[Kane]

A letter of guarantee is not just about providing a guarantee to a customer while trading with foreign companies. letter of guarantee is also provided to local businesses. For instance, if a company wants to do business with another company but cannot pay immediately, it will acquire a letter of guarantee from a bank. Sometimes it is also referred to as a bank guarantee.