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Bank guarantees can facilitate business transactions and reduce uncertainty in dealings with other companies. Guarantees enable businesses to minimize the risk associated with various transactions.
Bank guarantees can facilitate business transactions and reduce uncertainty in dealings with other companies. Guarantees enable businesses to minimize the risk associated with various transactions.
Bank guarantees are commonly used in domestic and international business transactions. Bank guarantees can facilitate trade and reduce uncertainty when dealing with other companies.
A bank guarantee means that a bank irrevocably guarantees payment for goods, services, or due to breach of contract, ensuring that the seller can be confident about receiving payment even if the customer fails to fulfill their obligations.
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If you are looking for a different type of bank guarantee, please don't hesitate to contact us by sending a line to fyrirtaeki@arionbanki.is, and we will find the solution together!
All guarantees are essentially payment guarantees, as the bank guarantees payment to the beneficiary if the applicant fails to meet their obligations under the underlying agreement. A general payment guarantee is usually issued when the guarantee does not fit into other specific guarantee types.
A rental guarantee provides security to the landlord by ensuring payment of unpaid rent or compensation for damages if the tenant does not fulfill their obligations under the lease. It is based on the lease agreement and generally covers several months of rent, allowing the landlord to submit a claim during the guarantee‘s validity period.
Performance guarantees ensure that the beneficiary receives payment if the applicant fails to meet their obligations under a contract. The guarantees are commonly used for construction projects, roadwork, system installations, waste collection, snow removal, and similar contracted activities
Advance payment guarantees are used when a buyer pays in advance for a specific project, production, import/export of goods, etc. The guarantee protects the beneficiary (the buyer) by allowing them to claim repayment from the bank if the seller fails to meet their obligations under the underlying contract. The guarantee becomes effective once the advance payment has been received in the applicant’s account.
These guarantees are issued to the Travel Insurance Fund (Ferðatryggingasjóður) in connection with travel agency licenses for regulated activities falling under laws and regulations supervised by the Icelandic Tourist Board, on behalf of the Travel Insurance Fund.
These guarantees are issued to the Icelandic Tax Authority. The most common use is for special VAT registration related to construction projects. The guarantee ensures that the bank will pay the VAT (input and output tax) to the Tax Authority if the applicant does not. The guarantee amount is index‑linked and updated monthly in line with the relevant index.
Bid guarantees relate to bids submitted for WTO/EU tariff quotas on imported agricultural products from Europe. They are issued to the relevant ministry as security for the bidder’s fulfillment of obligations.
Fish market guarantees cover outstanding trading debts arising from the date the guarantee is issued until two weeks before its expiry date. These guarantees are issued to RSF (Reiknistofa fiskmarkaða hf.) or other fish markets.
A counter‑guarantee is issued to a foreign bank as security for that bank to issue a local guarantee at our request to a third party. The approval of both the receiving bank and the beneficiary’s bank is required for the guarantee to become valid.
Import guarantees are used when goods are imported to Iceland from a foreign seller. The buyer applies to Arion Bank for an import guarantee, which issues it and sends it to the seller's bank abroad. The seller then ships the goods to Iceland and submits the required shipping documents to their bank, which forwards them to Arion Bank. Arion Bank pays for the documents if they meet all the guarantee's terms. Once payment is made, or after an approved due date, the documents are handed over to the buyer.
This way, the buyer reduces the risk of paying for goods without adequate documentation, and the seller gains added assurance that payment will be received before the buyer can access the goods.
Import guarantees are used, among other things, in initial transactions between parties who have not previously done business together, or when the bank finances the import and takes a lien on the imported goods.
Export guarantees are used when goods are shipped from Iceland to foreign buyers. In this case, the foreign buyer applies to their bank abroad for a Letter of Credit guarantee. Once the guarantee is issued, the foreign bank sends it to Arion Bank, which notifies the seller. The seller then ships the goods and submits the export documents to Arion Bank, which forwards the documents to the foreign bank. If the documents meet all the terms of the guarantee, the foreign bank pays Arion Bank, which passes the payment on to the seller upon receipt. This arrangement ensures payment only occurs if the correct documents are presented, providing both the buyer and the seller with added security. It is particularly useful in exports to foreign markets where cash flow may be uncertain or where trust has not yet been established between the buyer and the seller. In some countries, this is the buyer's only option for financing the purchase of imported goods, as the bank assumes the payment obligation once the guarantee terms are fulfilled.
Arion Bank offers export companies a document review service for export documents before they are sent to the buyer's bank. The aim is to minimise the risk of the documents conflicting with the guarantee terms or containing internal inconsistencies before submission.
The seller submits the necessary documents (e.g., invoices, bills of lading, and certificates of origin) to Arion Bank along with a collection request. Arion Bank forwards the documents to the buyer's foreign bank, which collects payment from the buyer. The buyer receives the documents only after the bank collects payment.
This increases security in exporting goods, as the seller neither has to collect payment themselves nor worry about delivering the goods before receiving payment. The service is similar to export letters of credit in that documents are sent against payment, but unlike letters of credit, it offers no underlying guarantee or predefined terms.
Import collection simplifies payment flows in import transactions. Arion Bank receives documents from the seller through a foreign bank and collects payment from the buyer before releasing the documents.
The service is often used when a foreign seller prefers not to use an import letter of credit but still wants to ensure payment before the buyer gains access to the shipping documents.
This creates greater security in cross-border transactions, and payments are processed quickly and reliably.