What Type of Information Is Included in a Guarantee Letter?


Quick Answer

Information in a bank letter of guarantee includes the official name of the company or person for whom the bank is stating guarantee, as stated by Myron Bowling Auctioneers. If a check is involved, the name on the check should match that on the letter. It should also have the account number of the drawer.

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Full Answer

Other information included is the date after which the letter of guarantee reaches expiration, according to Myron Bowling Auctioneers. This is usually not less than seven days from auction. The bank also states in the letter the maximum amount it guarantees. The check must not have an excess of the guaranteed amount written on it. The letter must also be written on official letterhead of the issuing bank and signed by a representative of the bank. Additionally, the bank has to sign a statement of irrevocable guarantee regarding the payment.

All information in a letter of guarantee serves to meet the main objective of that particular letter, which is to protect the supplier against the risk of not receiving appropriate payment for the goods he sells. When a brokerage account does not hold the underlying asset of a call option, call writers often make use of a letter of guarantee, notes Investopedia.

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