Advance payment guarantee, also known as repayment guarantee and refund guarantee, can also be called down payment guarantee in trade contracts.
Advance payment guarantee, also known as deposit guarantee, is an economic guarantee issued by the contractor to the owner through the bank to ensure that the contractor repays the project funds to the owner in advance according to the contract. After the guarantor issues the advance payment guarantee to the owner, the owner can pay the contractor an advance payment of 10% ~ 15% of the total contract price according to the contract, so that the winning bidder can purchase relevant equipment and materials.
Its main responsibility is that the contractor shall repay the advance payment within the prescribed time limit. The term of the advance payment guarantee shall be agreed by both parties. Under normal circumstances, the advance payment will be deducted from the project payment on a monthly basis according to the progress of the project, and the amount of the advance payment guarantee will be reduced accordingly month by month, which should be clearly stated when issuing the guarantee. ?
When the contractor pays the advance payment within the specified time, the owner needs to return the advance payment guarantee.
In large-value transactions, the buyer or the owner needs to pay a certain proportion of money to the supplier in advance as the start-up fund for contract execution within a certain period of time after the contract is signed. Because the money is paid in advance by the supplier before the performance, the buyer usually asks the supplier to issue an advance payment guarantee through his bank within a few days before the buyer advances the money, and some banks make promises to avoid unreasonable losses caused by the supplier's refusal or inability to perform the obligations in the future.
Once the applicant fails to perform the contract or fails to fully perform the contract (whether intentionally or unintentionally), after receiving the buyer's claim, the guarantee bank will return the amount equivalent to the prepaid amount or a considerable proportion of the unpaid part of the contract to the buyer, so that the buyer can recover the prepaid amount smoothly.