Bid Guarantee. In this case, the bid bond shows that the supplier is creditworthy and that if the buyer has paid for goods and the supplier fails to deliver on the contract, the buyer can be reimbursed through a guarantee. 

Performance Guarantees: If a supplier doesn’t meet obligations under the contract, the bank can step in a repay the buyer. 

Advance Payment Guarantee: The bank will pay the importer, if the exporter doesn’t meet contractual obligations, repaying the payments made by the buyer to the supplier.

Deferred Payment Guarantee: The payment is made at a set number of days after a defined event in the transaction, both the date and event being stipulated in the guarantee. 

Shipping Guarantee: This is most commonly taken out under an LC. In the event that an importer has not received the bills of lading (BL) when the goods have in the port. The importer can ask for a shipping guarantee issued by the bank. They can present this to move the goods out of port without presenting the BL. Increasing speed through the port, reducing costs from loss of perishable goods value and demurrage charges. 

Letter of Indemnity (LOI): This will be taken out in the event that bills of lading hasn’t been received before the arrival of goods at the port. Carriers will ask for LOI. Without an LOI carriers may not be covered by their Protection and indemnity insurance (P&I). An LOI can be obtained from a bank or insurance company. LOI does not remove carriers liability.

Import LC: Secures the means of payment to the supplier through the issuing bank, and the buyer will only have to pay once the documents stipulated in the LC are presented by the supplier. You can negotiate longer terms of payments with the supplier, for example using a Usance LC.

Usance LC: Payment will be made by the buyer’s issuing bank to the supplier at a later date stipulated in the contract. This allows the buyer time to use the goods productively and send payment.

Export LC: Issuing bank, or the confirming bank will guarantee payments if the conditions in the LC are met and the exporter has provided the confirming document.s

Irrevocable LC: A buyer can cancel or amend the LC, as long as both parties agree. This allows them to enter into a new LC if the sales contract changes or the circumstances of the transaction. The LC also cannot be revoked by the issuing bank without the beneficiary’s consent.

Confirmed LC: The supplier can ask their bank to take on the risk of non-payment in the LC.

Once the bank has received the required documents to meet conditions in the LC, the bank will send money to the supplier. Even if the buyer or issuing bank is unable to pay the amount stipulated in the LC. This normally incurs a charge made by the bank to the supplier dependent on the credit risk of the issuing bank.

Unconfirmed LC: If conditions in the LC are met, payment to the supplier is the responsibility of the buyers issuing bank. The risk on non-payment is with the issuing bank, which is usually a foreign bank. This is cheaper than a confirmed LC.

A special thank you to Peter Sproston for his additional comments.