External Guarantees

External Guarantees

With Kuveyt Türk support, you can guarantee all your business and payments anywhere in the world.

With Kuveyt Türk's External Guarantees support, you can provide assurance for all your business and payments.

What is an External Guarantee?

External Guarantees are contracts that enable domestic businesses in Turkey to do business abroad and foreign-origin businesses in Turkey.

External Guarantees protect the addressee if a work or payment is not made.

Types of External Guarantees

Letter of Guarantee

  • Letter of Guarantee is used on the condition that the addressee accepts the Letter of Guarantee issued by the issuing bank.
  • Once the issuing bank issues the Letter of Guarantee in the addressee’s name, it asks its foreign correspondent bank to forward it without assuming any responsibility.
  • The advising bank forwards the letter to the addressee. This bank also checks whether the indemnity claim is signed by authorized persons.


  • A Counter-Guarantee is a commitment guarantee requested from a different bank in return for the letters of guarantee to be issued by banks to their customers.
  • Kuveyt Türk ensures the letter is delivered to the addressee with the Counter-Guarantee issued to the correspondent bank in the relevant country.

Other Types of External Guarantees

  • Tender Bond/Bid Bond: Issued to the contracting authority to participate in tender bids.
  • Performance Guarantee: A type of guarantee that allows the addressee to make a complaint during the term of the contract and in case the obligations of the guarantee are not fulfilled.
  • Advance Payment Guarantee: It is a guarantee given in the event that the importer or the commissioning party makes a prepayment to the contractor for the work to be carried out as soon as possible. It provides assurance that the advance or prepaid amount will be repaid immediately if the obligations are not fulfilled.
  • Payment Guarantee: In import transactions through Cash On Delivery and Cash Against Goods, a payment guarantee ensures that the amount specified in the contract will be paid to the seller when the documents or goods arrive.
  • Retention Bond: The tenderer or the employer retains a portion of the contract price for a certain period following the completion of the work subject to the contract. This condition is realized by deducting a certain amount from each payment. When the contractor gives a retention bond to the employer, no deduction is required.
  • Stand-by Letter of Credit: This is a type of guarantee that ensures payment will be made if an obligation is not fulfilled.

External Guarantee Procedures

  • The beneficiary and the addressee sign a contract for the relevant work.
  • The beneficiary requests its bank to issue a Letter of Guarantee directly to the addressee or to the addressee's bank to be notified directly. If the letter is requested to be issued to the addressee's bank, the request is opened as a Counter-Guarantee.
  • Upon the beneficiary's request, the letter is issued as demanded.
  • The addressee's bank notifies the addressee of the direct guarantee. If a Counter-Guarantee is issued, the bank issues its own guarantee statement.

Make your application for External Guarantees through Kuveyt Türk branches now!

Frequently Asked Questions

Who are the parties of external guarantees?

  • Guarantor Bank: It is the bank that issues the guarantee and has obligations towards the addressee.
  • Counter-Guarantor Bank: It is the bank that issues a Counter-Guarantee in favor of the guarantor or other counter-guarantor bank.
  • Beneficiary: It is the party who has responsibility for the business relationship subject to the guarantee and whose obligation is supported by the guarantee.
  • Counterparty: The party in whose favor the guarantee is issued.

How are the rights and responsibilities of the parties regulated in external guarantees?

The rights and responsibilities of the parties are determined by the URDG 758 brochure published by the International Chamber of Commerce.

What are the advantages of external guarantees?

The beneficiary is authorized to determine the rules to ensure that there is no unfair compensation. In addition, the beneficiary might not be paid by the banks if an unfavorable indemnification request is made.

The addressee, on the other hand, has a bank guarantee that the price of the work subject to the Letter of Guarantee will be paid.