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It is common for a principal, buyer or contract awarder to require their supplier to provide bonds or bank guarantees.

Should your requirement for the above exist, MEIB may be able to assist. MEIB’s bond can help you meet your contract requirements without tying-up all your working capital.

The types of bonds MEIB provides include:

Bond

i. Tender / Bid Bond

Normally required in open tender. A bid bond protects your buyer from loss should you refuse or fail to undertake the project after awarded with the contract.

ii. Advance Payment Guarantee (APG)

At the beginning of a contract, your buyer may agree to make an advance payment to you prior to receiving delivery of your goods or services.

While this facilitates your working capital requirement for the contract, your buyer may need assurance that their advance payment will be returned if you don’t complete the contract. An advance payment guarantee provides your buyer with security for their upfront payment.

iii. Performance Bond Guarantee (PBG)

A performance guarantee gives your buyer assurance that if you don’t perform your obligations under the contract, they can liquidate the guarantee to reduce their losses.

iv. Warranty Bond

A warranty bond protects your buyer from loss if the goods or services you provided does not meet your contractual warranty obligations after you have completed the contract.

Confirmation (Guarantee) of LC (Letter of Credit)

If your bank is unwilling to take the risk of your buyer’s LC issuing bank for payments, MEIB can provide a guarantee to your bank and assume the credit risk of your buyer’s bank. As MEIB’s guarantee secures payment under the LC issued by your buyer’s bank, it enables your bank to confirm that it will make payments to you.

MEIB's confirmation or guarantee can help protect your export contract payments. It gives you increased confidence that if you provide your bank with the documents required by the by the LC, you will receive the payments due to you.

In addition, if you’re unable to obtain working capital to finance an export contract because your bank won’t confirm a documentary credit, a documentary credit guarantee from MEIB may help. If your bank is comfortable with your ability to meet your performance obligations under an export contract, the guarantee from MEIB can enable your bank to confirm the LC, discount the payments under it and make working capital available to you.

flowchart LC

Export Financing (EF) Guarantee

If you’re a profitable, fast-growing small to medium sized exporter, you may find that you’ve reached your borrowing limit and need more working capital to finance the expansion of your export business. However, you may be unable to provide the additional security that your bank requires in order to increase your export financing facility.

MEIB’s EF Guarantee could potentially be one of the solutions to your requirement. It provides security for the bank to lend you the extra funds you need, without requiring additional security from you.

MEIB’s EF Guarantee is an extension to your facilities with your bank and supports general export funding rather than a specific export transaction or contract. This means you can take immediate advantage of new export opportunities, increase your export capacity or build infrastructure and product lines.

flowchart EF

Confirmation (Guarantee) of LC

How does MEIB's LC Guarantee work?

  1. You enter into an export contract with your overseas buyer
  2. Your buyer instructs their bank to issue LC to your bank to make export contract payments to you
  3. Your buyer’s bank issues LC to your bank
  4. MEIB issues LC guarantee to your bank, securing payment on the LC by the buyer’s bank
  5. Your bank confirms the LC. When you have performed your contractual obligations, you deliver to your bank the documents stipulated in the documentary credit
  6. Your bank makes payments to you.

Terms and conditions

Terms and conditions will be negotiated during the application process. The following guidelines provide an indication of typical requirements:

Eligibility

You should be a supplier/producer of goods or services.

Generally, the contract to be supported by the guarantee will have have a minima value of USD100,000.

Maximum value

The guarantee may be for up to 100% of the LC value, which is generally limited to 85% of the export contract value.

Term

The guarantee will apply for the duration of the LC.

Fees & charges

Fees and charges vary depending upon a number of factors including MEIB’s risk assessment, term and security.

Security

To be determined on case to case.

Export Financing (EF) Guarantee

How does MEIB's EF Guarantee work?

  1. You apply to your bank for additional working capital.
  2. Your bank forward your application to MEIB for guarantee cover.
  3. If MEIB approves the application, it provides EF a WC Guarantee to the bank for the additional working capital.
  4. The bank provides the additional working capital funds to you.

Terms and conditions

Terms and conditions will be negotiated during the application process. The following guidelines provide an indication of typical requirements:

Eligibility

As a general rule, MEIB’s EF Guarantee is available to companies who:

  • have an existing banking relationship with the recommending bank*
  • are producing goods or services for export..

* MEIB may at its discretion consider applications for guarantee cover by companies that has no facility yet with the recommending bank.

Maximum value

up to the amount of your annual export turnover, but generally limited to 20% of your total facilities.

Currency

Non-ringgit.

Term

Flexible period of up to 12 months.

Fees & charges

Fees and charges vary depending upon a number of factors including MEIB’s risk assessment, term and the level of existing security.

Security

Subject to the normal security arrangements you have in place with your bank, no additional security is generally required.

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