Advance payment guarantee, also known as Advance Payment, is used by contractors in the construction field. A bank gives the guarantee to secure payments to their customers from third parties that award them projects, but the customer or contractor does not yet do it. It binds the supplier or the bank’s customer to spend the advance payment as stated in the contract signed by the principal and the customer.
The advance payment guarantee becomes valid and effective after the advance payment is received. It is used for construction projects and is required by the customer if the contractor asks for advance payment. The bond protects the client in case the contractor doesn’t fulfil obligations according to the contractor.
Advance payment guarantees Kenya
Requirements to Get an Advance Payment Guarantee
Mwananchi Credit is one of the institutions that offer any advance payment guarantee form. However, for them to consider you, you must have the following:
- Verified postal address
- Company name
- Phone number
- An award letter, which employer gives
- Performance bond employer
- Address of procuring entity
- Last six bank statements
- Portfolio showing all completed jobs
- APG validity
- Tender description
Applying for a Bank Guarantee
Mwananchi Credit offers guarantees to companies and individuals. But businesses are the majority applicants of guarantees. They are not hard to obtain as long as you meet their qualification requirements.
To apply for an advance payment guarantee bond, you contact Mwananchi and fill out their application form to state the amount you want and why you need the guarantee. Typical applications specify the period in which advance payment guarantee in construction will be valid and any other particular payment conditions and details of the beneficiary.
You may be required to provide collateral in the form of an asset pledge agreement, including cash accounts, bonds and stocks. However, illiquid assets are not acceptable, and they include houses, cars, antiques and many others.
How Advance Payment Guarantee Insurance Works and Who Needs It
Mwananchi Credit provides an advance payment guarantee that comes in different types. Some of the common advance payment guarantees formats including:
Those who know what is advance payment guarantee cannot get into a construction contract without one. It offers protection and reduces the risk of losses if a contractor cannot complete a project. However, advance payment guarantee bond is not limited to constructors. Various parties use it, and banks give them for the following reasons:
- The first reason is to assure a seller that the buyer will pay the agreed price on the particular date as stated in the contract.
- A simple advance payment guarantee definition shows that it works as collateral to reimburse advance guarantee payment from the customer if the supplier fails to deliver goods as agreed.
- Security bond to work as a loan collateral
- Rental guarantee to serve as collateral for landlord-tenant agreement payment.
- Performance bonds that work like collateral for customers expenses incurred when the contractor fails to deliver as agreed in the contract.
- Warranty body to ensure goods are delivered.
You have plenty of reasons to get an advance payment guarantee from Mwananchi Credit.
Mwananchi offers genuine bonds, and you can trust them for any new activities. You can rely on them when you need an advance payment letter of guarantee.
Mwananchi Credit is a dedicated team that ensures everything is done and delivered according to your needs.
Frequently Asked Questions
What is the difference between a performance bond and an advance payment guarantee?
Performance bond and advance payment guarantees are different.
The former is a security to ensure that a contractor keeps his word according to the terms and conditions of a contract and within the agreed price and time allowed. On the other hand, a payment bond protects subcontractors, material suppliers and certain laborers against nonpayment.
Is advance payment guarantee a financial guarantee?
Advance payment guarantee becomes collateral to reimburse the payment to a buyer in case a seller does not stick to details in the contract. It is a financial guarantee because the buyer will not lose if the goods are not delivered as stated in the contract.
How does APG work?
APG is issued to protect a payment made upfront to a contractor by a client to help get the project started. It is issued as a guarantee that enables the supplier or contractor to collect fees to mobilize the contact.
How does an advance payment guarantee work?
An advance payment guarantees work as security to release mobilization payment for a particular project. Its primary purpose is to bind a contractor to only use the advance payment for the stated purpose.
What is the purpose of advance payment?
The purpose of advance payment is an amount requested by a contractor to meet startup costs that require to be catered for before a project can start.
What is the difference between an advance bank guarantee and a performance bank guarantee?
A bank guarantee can be referred to as a promise given by a financial institution such as a bank and states that it will pay for liabilities if a contractor does not finish his work according to the contract.
Do advance payments include interest?
Yes, advance payments include interest and bind the customer to help them obtain goods on credit.
Mwananchi guarantees you advance payments that are competitively priced. It becomes effective when Mwananchi receives the advance payment. This company is one of the most reliable providers of advance payment guarantee in Kenya.