A bank guarantee in a company refers to a promise made by a bank to cover the debts or obligations of a borrower in the event that the borrower is unable to fulfill their obligations. In other words, if the borrower defaults on their loan or other obligation, the bank will step in and pay the debt on their behalf.
It’s important for a company to understand the terms and conditions of a bank guarantee, and to use it responsibly. Misuse of a bank guarantee, such as by defaulting on the loan or failing to fulfill the obligations specified in the guarantee, can result in significant financial losses for the company and damage to its reputation.
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