In the context of your business and/or professional activity, the Cooperative Bank of Karditsa provides you with the possibility of issuing letters of guarantee. The letter of guarantee is a credit supply product issued by our Bank, upon your request, and addressed to a third party (beneficiary). If the person in whose favor the Bank guarantees does not fulfill its obligations to the beneficiary of the letter of guarantee, our Bank undertakes to pay up to the guaranteed amount to the beneficiary.
The letters of guarantee, depending on the kind of the guarantee provided, are divided into:
It is preferable by those who want to participate in a call for bids, public or private for the supply of items or construction or undertaking projects, in order to submit it in advance to the operator of the tender. The amount of the letter of guarantee is usually 5% of the total amount of the project commission.
It concerns the observance of agreements and in general the fulfillment of the terms of a contract or the coverage of customs duties and taxes on imported goods intended for export. This letter of guarantee usually replaces and cancels the letter of guarantee that no longer exists. Its amount is usually 5% to 10% of the amount of work undertaken.
They are common in all public works and are also called 10% Retention Bonds (or less often 20% Retention Bonds). When a business undertakes a project and submits the letter of guarantee of good execution and the project begins, from time to time, the work that is completed in a certain period of time is evaluated by the supervising engineer of the service or organization (for which the project is executed) and the payment is approved by the competent authority. This account has been established to be called project certification.
The contractor does not get the full amount from each certification. A percentage of 10% is usually withheld and will be returned to the contractor when the project is completed on time and in accordance with the specifications and terms of the contract, after the period specified in the contract has passed from the delivery of the project, in order to determine its proper operation. This period is usually one or two years from the delivery of the project and, of course, the contractor always needs cash to continue the work and the execution of the project, but also the amounts withheld remain unused. For this the reason, the contractor provides (the service - agency) a letter of guarantee from a financial institution, which replaces the cash. In this way the organization is secured with the letter of guarantee, which is a complementary good performance and the contractor receives the full amount of certification.
In most cases, the contract for the execution of a project or the supply of items, which is signed after the award of the tender, provides for the undertaking of an advance payment. A letter of guarantee from a financial institution is provided for the collection of this advance payment. The amount of the deposit is withheld either at the end of the execution of the order, when it concerns the supply of items to the State, or during the partial deliveries. It can also be withheld gradually in accordance with the contract from any certification when it concerns construction work.
