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Bank Guarantees In Bulgaria

Sometimes, bank guarantees are an effective replacement of bank loans.

In many cases, companies need a financial support by reliable institutions and therefore they can use the bank guarantees instead of applying for a bank loan. By this, the companies can save some expenses related to interests, charges or commissions, as well as valuable time. Also when the guarantee is provided and covered through property mortgage, it takes some time while the bank makes a research and evaluation of the respective real estate.

During the last decade the demand for bank guarantees as a service has enormously increased due to the risks in the trade and financial deals. The bank guarantee is one of the definitions in the international trade, varying in its meanings and titles.

In general, the bank guarantee is a type of agreement, under the force of which by order of a certain customer, the bank undertakes to pay a certain amount to a third person, according to specific terms.

Bank guarantee forms are, in fact, dual purpose documents. They operate as guarantees where the borrowing is enforceable against the principal debtor - the guarantor by definition incurring secondary liability - but as indemnities where it is not. It is a type of deal and therefore is regulated by the civil and Commercial Law in Bulgaria. It is also being regulated by the principles of the International Commerce Chamber.

According to the definition given by the Commercial Law, the bank is obliged in writing to pay the agreed amount to the person requiring it under the stipulated terms.

Usually, the bank guarantee is given on a real financial security, i.e. property mortgage.
You should know that there is a certain difference between bank guarantees and bail. The bank guarantee is most of all a commercial security in the relations between merchants and the bail is used mainly in the field of civil relation. The bail is an agreement and the bank guarantee is a unilateral deal.

Unless supported by a cash deposit or other security, a guarantee is always of an uncertain value as a security. The financial situation of the guarantor can change very quickly. An unsupported guarantee should only be accepted after careful investigation into the proposed guarantor's financial circumstances.

Court action may be necessary to realise the security and a technicality may defeat bank's claim.
In conclusion, before making a decision to use the services of bank guarantees, consider contacting a serious and successful lawyer that will give you proper advice and therefore they will see the pros and cons of the bank guarantee in your specific case.

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