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Banker’s Guarantee & How It May Sometimes Be Used in Lieu of Security Deposit

Banker’s Guarantee & How It May Sometimes Be Used in Lieu of Security Deposit

As we know almost all industrial space rental in Singapore require a security deposit amount in order to enter into a lease agreement between the tenant and landlord.

Some Landlords Are Able to Accept Banker’s Guarantee

While transferring funds or issuing a cheque is a more hassle-free and a more common way of letting the landlord have the security deposit amount, there may also be another way to fulfil the security deposit amount provided that it is also acceptable to the landlord. However, you may note that only certain landlords will be able to accept banker’s guarantee in lieu of the security deposit amount. Hence, it is always advisable to first verify with the landlord before applying for a banker’s guarantee.

How Banker’s Guarantee Works

In order to use the banker’s guarantee or BG in lieu of the security deposit, you may apply for a banker’s guarantee (BG) through a bank. The banker’s guarantee serves as a form of guarantee whereby if there is any breach in the contract terms, the landlord would be able to claim from the banker’s guarantee. It works in a similar way to the security deposit except that the monies are kept with the bank.

Are There Charges for Banker’s Guarantee

Usually for any banker’s guarantee, there is a certain rate that the banks will charge and it may range from a few hundred or can sometimes be calculated in terms of few percent of the guaranteed amount. The actual charges would usually depend on the guaranteed amount and can vary from bank to bank.

How to Go About Getting a Banker’s Guarantee

In order to obtain a banker’s guarantee, you may approach a preferred bank or or a bank that is approved by the landlord by submitting an application through the bank. Do note that there will be some eligibility criteria so do be sure to check that out and make sure that the required documents are submitted to the bank in order for them to process the banker’s guarantee application. The approval process may also take some time so do be sure to factor that in so that your company will have sufficient time in order for the deal to go through smoothly without hiccups.