Payment guarantees

A payment guarantee is a type of financial commitment requiring the debtor to repay the debt in accordance with the original debt agreement's terms and conditions. This guarantees the payment of either services or supplies. For example, a contractor may wish to secure payment from the owner or a subcontractor from the contractor. Suppliers, who do not want to insure their debtors using conventional credit insurance, may elect to secure payment by a debtor through such a guarantee through payment guarantee specialists like WFJ Services.

In some cases, the guarantee is backed by collateral, such as property or another acceptable asset to the lender. Different types of guarantees are used in various business settings, such as working agreements between importers and exporters or suppliers of goods and services which require a guarantee from a parent company when doing business with a subsidiary.

Many import-export transactions use one of the more common types of guarantees. In this case, the seller may demand what is known as an advance payment guarantee. The guarantee amount can be the full price of the goods to be shipped or a specific percentage of that price. In most cases, the funds are held in the seller's bank until the order is shipped, received, and accepted by the buyer. The funds are then released to the seller, and any outstanding payments are made. However, if the seller fails to ship the goods in accordance with the terms, or if the received order is incorrect, the buyer may invoke the payment guarantee if the seller is unwilling to take steps to fulfil their contractual obligations.

When a potential borrower's credit is deemed insufficient to meet the lender's standards, a payment guarantee may be required through payment guarantee specialists like WFJ Services. For example, if a bank believes that a subsidiary of a larger company is not a good credit risk, the bank may require that the subsidiary's parent pledge some collateral. The collateral ensures that the lender will receive total compensation for the loan even in the event of a default.

Why choose WFJ Services?

We are payment guarantee specialists in South Africa. Our friendly staff has years of experience, will assist with your insurance needs, and promise a quick turnaround time.