The main cost under a guarantee is the establishment fee, usually a half-yearly percentage risk fee based on the risk profile of the applicant which is usually charged in advance.
It is standard international practice for the applicant party to pay all the cost. So if another cross-border bank is involved, then the applicant party also pays the other bank cost.
If your business does not already enjoy credit facilities with the bank, you need to approach your Relationship Manager for a limit to be marked. You also need to complete an application form and provide the proposed wording of the guarantee to the bank for approval.
If it is the first time that you want to issue a guarantee, you need to complete a General Indemnity for Guarantees; this indemnity will cover all guarantees to be issued by the bank on behalf of your business.
The laws that apply to a guarantee can be a very complex factor. Usually all guarantees issued in Botswana will be subject to Botswana law. If it is a crossborder guarantee and another bank is involved, then the laws of Botswana will apply to the counter-guarantee and the laws of the foreign country to the primary guarantee.
Guarantees are often governed by the International Chamber of Commerce publication URDG 758.
First National Bank of Botswana Limited - Registration number CO.001119.
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