Bank guarantee has long since ceased to be the only option

Working capital is the money your business needs to meet day-to-day financial obligations. For example, to pay suppliers, purchase goods and parts necessary for the business or project. Companies that manufacture capital goods (think machinery) and, for example, construction companies often need to provide financial guarantees as security that they can meet their obligations, take on a project and when they receive advance payments. In the current market, we also see prepayment guarantees being required when goods are ordered abroad (think China or Vietnam, for example).

Traditionally, these guarantees are often made through a bank, not surprisingly popularly called bank guarantees. A disadvantage of such a bank guarantee is that in most cases, the outstanding amount of guarantees is charged against the credit margin. This limits the working capital.

Then versus now

With the introduction of Basel in banks and Solvency in insurers (difference in assessment), insurers can issue very competitive guarantees/facilities without affecting working capital. A guarantee (facility) via an insurer is becoming increasingly popular because an insurer basically issues blank guarantees. As a result, no seizure is made of that all-important working capital. In recent years, more providers have entered the Dutch market because it is an interesting market for insurers. In doing so, they can compete with banks.

Looking to expand your working capital? Are you looking for financial guarantees or a guarantee facility? We would be happy to advise you!

Xolv BV is part of of the Ecclesia Group

Xolv is a partner in the international network ICBA

Bank guarantee has long since ceased to be the only option

Then versus now

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