Bank guarantee

A bank guarantee is an alternative to providing a cash deposit or bond directly to a supplier, vendor or landlord; known as a beneficiary.

A bank guarantee is a promise by the bank to cover a loss if a business transaction doesn't unfold as planned. Your beneficiary has the certainty of knowing they’ll be paid

Guarantees are often used for: Rental bonds to landlords or real estate agents to lease premises and Contract performance guarantees to meet contract obligations.

Issuing fee: An upfront fee is charged each time a bank guarantee is issued (minimum $125).

Service fee: An ongoing fee is charged half-yearly in arrears (minimum $125) for the duration that the bank guarantee is needed. A pro-rata amount of this fee is charged when the bank guarantee is cancelled or expires. 

As service fees are charged in arrears, a pro-rata amount of the service fee is charged when the bank guarantee is cancelled or expires. The pro-rata fee (minimum $125) is calculated from the date the half yearly service fee was last charged, up until the date of cancellation or expiry. The minimum half-yearly service fee is $125.

To cancel your bank guarantee, one of the following needs to occur:

• You or the beneficiary returns the original guarantee to us
• We can authenticate the bank guarantee
• The guarantee expires and no further action is required 
• The beneficiary has been paid by NAB
• If the bank guarantee is lost, the beneficiary writes to us to cancel the guarantee with a letter:
  • addressed to NAB
  • containing the details of the bank guarantee they wish for NAB to cancel
  • confirming that they no longer require the bank guarantee and wish for it to be cancelled by NAB
  • which is signed by the beneficiary on company letterhead.

Any form of acceptable security can be used to secure a bank guarantee. Subject to approval, this may include:

• Term deposit
• Residential or commercial property
• Other forms of security.

You can agree on a termination date with the beneficiary. This date marks the end of your obligations to the beneficiary, even if you lose contact with the beneficiary. It also marks the end of the bank’s obligations to the beneficiary.
Once the bank guarantee expires, the beneficiary can no longer make a claim and you’ll no longer be charged a service fee. The expiry of a bank guarantee is usually aligned with the date when your contractual obligations to the beneficiary finishes. For example, if your lease agreement ends in two years, your bank guarantee expiry date should be around the same date. For example, some people may add an extra three to six months to the expiry date of bank guarantees for commercial leases to allow for lease extensions or other reasons. This will also provide you with additional time to re-negotiate a new lease and provide a new bank guarantee if your contract extends beyond the expiry date.

For a bank guarantee with no expiry date, the bank’s obligations will continue and therefore you’ll continue to pay the service fee until the original bank guarantee is returned to us, authenticated and cancelled. The beneficiary can return the bank guarantee directly to us, or to you. Additionally, a bank guarantee with no expiry will allow the beneficiary to make a claim until it is returned to us and cancelled even if your contract has ended. 

The beneficiary unfairly calls payment under the bank guarantee. When the beneficiary calls on a bank guarantee, the bank is obligated to pay the beneficiary without checking with you and irrespective of any performance by you. The bank may choose to make this payment by debiting funds from your account even if this overdraws it. If your bank guarantee is secured by a term deposit, we may break the term deposit to pay the beneficiary.

Beneficiaries can make a claim on NAB bank guarantees at any NAB branch in Australia by presenting in person the following:

• The original bank guarantee
• Photo ID of the person presenting the claim
• Letter of demand on company letterhead:
  • Signed by the beneficiary in accordance with s 127 of the Corporations Act 2001
  • Addressed to NAB
  • Containing the details of the bank guarantee and requesting NAB to make payment under the bank guarantee.

You can choose to retain the term deposit and continue to earn interest or alternatively choose to break the term deposit (fees may apply) and have the funds transferred to your account.