What is a Bank Performance Guarantee?
Get a Bank Performance Guarantee Bond
A bank performance guarantee is another name for a surety bond known as a performance bond. This is a type of surety bond that is provided during a contract situation to allow a party to have assurance that another party will perform according to the terms of the agreement. The Miller Act requires a performance bond for all federal jobs and many states have passed similar acts (sometimes referred to as Little Miller Acts).
One thing that can be different about a bank performance guarantee is that in international bonding, these can refer to financial guarantees. Although they are still typically titled as “Performance Bonds” they tend to act like a financial guarantee.
The big difference is that in a standard performance bond situation, the surety can step in and choose another contractor to finish the job. However, in a financial guarantee situation, the Obligee can call the bond and the surety must pay for the entire amount of the bond to the Obligee; only then can they try and collect from the Obligor. So, if the job is half finished, in a normal performance bond situation they are only on the hook for 50%, but in a financial guarantee situation, they must pay the entire amount.