A bank guarantee is a pledge on the part of a bank to make someone’s debt good in the event that he or she cannot pay it. These types of guarantees are essentially like agreements to stand as a cosigner on a transaction; in the event that the original party cannot follow through, the bank can be called upon to provide the payment. Many banks offer bank guarantees as a service to their customers for the purpose of facilitating large business operations and deals, and this particular banking tool is primarily used by big customers such as corporations and governments.
By Ravi Mehta, Ph.D.
The UCP tells bankers to determine compliance with the LC on the basis of examination of the documents alone, which the LC calls for presentation. The UCP has codified standard for examination of the documents, which the bankers must observe to determine whether or not the documents appear on their face to constitute a complying presentation.
An advance payment guarantee is a form of protection that makes it possible for a buyer to recover any advance payments extended to a seller in the event that the seller fails to abide by the terms and conditions that govern the purchase of goods or services. A guarantee of this type may be used in a number of situations, including deals where goods are imported or exported. It is also used with domestic transactions, such as the purchase of heavy equipment, construction projects, or even large lots of retail goods.
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Different companies will have various motives when deciding to pursue an acquisition, divestiture, joint venture, or strategic alliance plan. The decision is usually driven by key business fundamentals such as broader competitive product line, access to strong distribution channels or new markets, sharing of scarce talent, lower unit cost position via the elimination of common costs, economies of scale, better market positioning with a stronger brand recognition, and faster speed of entering a market versus doing a start-up. In the case of divestiture, the motivation to sell may be due to poor financial performance of the company or, if the business is a subsidiary or division, it no longer fits strategically with the future direction of the company.
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The ability to negotiate successfully is crucial for survival in today’s changing business world. Negotiation is fun if you know what you’re doing. So for all you busy execs, here are Ten Tips for Successful Negotiating:
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The documentary letter of credit (“LC”) is a key payment method in international trade – not only does it satisfy both the seller’s and the buyer’s conflicting needs, but it also is considered to be relatively risk free. However, the recent surge in financial sanctions and embargoes, and the resulting “sanctions clauses” in LCs trying to meet the issue, is challenging the fundamental nature of an LC.
Due diligence is used to investigate and evaluate a business opportunity. The term due diligence describes a general duty to exercise care in any transaction. As such, it spans investigation into all relevant aspects of the past, present, and predictable future of the business of a target company. Due diligence sounds impressive but ultimately it translates into basic commonsense success factors such as “thinking things through” and “doing your homework”.