Result
Guarantee cost
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
Guarantee cost = guarantee amount × rate ÷ 100 × term ÷ 365. The bank charges a fee for taking on the obligation to pay the beneficiary if your company fails to fulfill the contract — essentially, it's a fee for using the bank's creditworthiness, not for handing out cash itself.
Bank guarantee rates are usually lower than an ordinary loan rate for the same amount — the bank reserves a limit but doesn't disburse money upfront, and the guarantee is likely never called on at all if the contract is fulfilled without breach.
The guarantee amount often isn't the full contract value — clients typically require a guarantee for a certain percentage of the deal (e.g. covering an advance or performance security). Make sure you enter the guarantee amount itself, not the full contract value.