No impact on credit facility
Bank guarantees are usually deducted from credit lines, which directly reduces working capital. Guarantee facilities through an insurer are in principle blank given and therefore do not affect the credit facility. This helps your organisation create more financial flexibility and grow faster.
Better international network
In a large number of countries (think South America, Africa and the Middle East), it is mandatory to issue a guarantee locally. Dutch banks hardly have any international branches left that can issue bank guarantees locally. As a result, they have to use so-called correspondent banks. This adds costs and often causes delays. Insurers, on the other hand, are in most cases represented abroad and can often provide the local presence needed. Moreover, some countries only accept guarantees from an insurer.
Direct access
It is important that your organisation has immediate access to guarantee facilities worldwide. Insurers can offer a one-stop shop that makes it easier to provide and manage the guarantees you need. It is also possible to split off guarantee facilities to local branches with the parent remaining aware of the total exposure.
Sharper rates
Depending on the strength of your balance sheet, profit and loss account and solvency, among others, insurers can provide facilities similar to bank guarantee facilities. Syndications with banks are possible but not preferred due to legal costs. Normally, insurers match the disclosures of existing lenders, so there is no extra work for you. Insurers providing guarantees are generally rated AA, which means they are better rated than banks in most cases. Together with the differences in European regulations (Basel vs Solvency), all this means that insurers can provide guarantees at a competitive price, despite the absence of collateral.
Summary
In light of the above, any company - which uses guarantees with any regularity - should consider applying for a guarantee facility through an insurer. They have access to an international network and at competitive rates. Moreover, lodging guarantees through an insurer does not affect the credit facility.
Want to know more about what a guarantee through an insurer can mean for your financial flexibility? We are happy to look into it with you without any obligation. Please contact us via info@xolv.nl or 073 - 820 02 95. Our specialists will be happy to talk to you.
