Bank Guarantee in Dubai, the UAE

A bank guarantee is an official promise provided by a bank or another financial institution that guarantees that it will cover a debt in case a debtor fails to do so. This allows your business to grow and expand and invest on a larger scale. Bank guarantees are provided by all local banks of the UAE and Dubai, in particular. The main types of bank guarantees in the UAE include:

• Tender Bonds/bid bonds – the seller's obligation arising after the buyer's acceptance of the offer;
• Performance Bonds/performance guarantees – these are bonds that cover any losses incurred by the buyer;
• Advance Payment Guarantee ensures the security of any advance payment. If the seller can’t provide the service, the buyer can get the money back;
• Retention Guarantee is a guarantee issued by the bank of the supplier company or the contractor company when the buyer is in no hurry to pay the last payment under the contract, waiting for everything to be fully executed;
• Payment Guarantee is a guarantee provided to a seller on a predetermined date;
• Financial Guarantee is the obligation of the Guarantor to pay the money at the request in case of failure to meet the guarantee obligations and pay customs fees.

How to get a bank guarantee in the UAE?

The main advantages of bank guarantees in the UAE are the ability to satisfy the requirements of the suppliers and customers without being charged for deposits, an opportunity to earn interest for cash with the help of the cash-covered bank guarantee.

A bank guarantee letter in the UAE is a written guarantee issued at the request where a bank claims to pay a fixed amount of money at a specific date to a specific party. To provide a bank guarantee letter to an individual or a legal entity, a UAE bank has to be completely sure that the customer is reliable. That is why risk assessment of an individual/legal entity will be conducted by the UAE bank. You will be required to provide:

• your ID or passport with the UAE residence visa;
• valid legal documents;
• address verification.

All types of bank guarantees can be provided against some certain collateral only. Means banks need to be able to block/reserve some assets against the amount specified in the bank guarantee.

The UAE laws do not set any time limits for a bank guarantee. All issues related to bank guarantees in the UAE are covered in the Commercial Transaction Law issued in 1993. It regulates the conditions and types of bank guarantees in the UAE.

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