Introduction
It is the written document issued to the owner or the buyer from Bank of China to guarantee that applicant will continue to fulfill contract obligation after withdrawing final payment of the contract price in advance, at the request of construction contractor or supplier.
Functions
The product allows the applicant to collect final payment in advance from the owner or the buyer in the later stage of executing construction contract and procurement contract, thus accelerating capital turnover and gaining capital benefits.
Features
1. Reduce capital occupation due to cash margin payment.
2. Collect final payment in advance and gain capital benefits.
3. Solve the problem of mutual mistrust between both parties of a transaction and improve the commercial credit of enterprises. With good reputation, Bank of China involves in the transaction and acts as a guarantor to promote smooth transaction by providing guarantee for the parties.
Charges
Retention money guarantee fees shall be charged based on the principles and rates determined in accordance with relevant rules of Bank of China; the fees for letter of guarantee in foreign currency shall be charged in the same way as for letter of guarantee in RMB.
Target Customers
1. Contractors involved in construction contracts;
2. Suppliers involved in material procurement projects.
Application Qualifications
1. The applicant shall hold a business license of legal person that has passed the annual inspection or other valid certificates which fully prove its legal operation and scope of business;
2. The applicant shall have a loan card;
3. The applicant shall have an account opening permit and open a settlement account with Bank of China;
4. The applicant shall have the qualification to engage in relevant business (such as qualification of contracting foreign projects, construction qualification of building enterprise, etc.);
5. The applicant shall have a credit line at Bank of China, or pay full margin, or full guarantee acceptable to Bank of China.
Process
I. Application for letter of guarantee
1. The applicant fills out an application form or a contract for issuance of a letter of guarantee;
2. The applicant pays margin or submits other counter-guarantee;
3. The applicant submits primary documents related to the contract;
4. The applicant submits other documents necessary for issuance of a letter of guarantee as required by Bank of China.
II. Examination and issuance of letter of guarantee
1. Bank of China examines the customer qualification, underlying transaction and relevant documents;
2. Bank of China confirms the customer's margin or credit line and other mortgages;
3. Bank of China examines the written application and form of letter of guarantee;
4. Bank of China issues the letter of guarantee.
Kind Reminder
1. Amendment to letter of guarantee: The clauses of the letter of guarantee can be amended on request of the guaranteed party and the beneficiary, such as extension of the validity period.
2. Payment/compensation against letter of guarantee: In case the beneficiary claims compensation within the validity period of the guarantee, the applicant should be notified in time. The payment should be made after the guaranteeing bank examines the claim documents and confirms the documents are in compliance with the claim clauses of the guarantee.
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