Do you know the differences between technical and economic guarantees?
Posted: Thu Jan 23, 2025 6:48 am
Difference between technical and economic guarantee
Guarantees are essential when applying for a loan or submitting a bid for a project, as they are a guarantee that an external entity will respond to the obligations you undertake. Obtaining a guarantee also gives more credibility to your company and improves its image, which increases the chances of accessing larger projects that allow you to grow.
To expand the horizon of your business you can use two types of guarantees : the technical guarantee or the economic guarantee, also called financial guarantee. The economic guarantee is the best known, since it is the one that banks usually request to grant a loan or line of credit to companies or self-employed workers. However, last year 4.7% of SMEs required technical guarantees to develop their activity, according to the XI Report on " SME Financing in Spain " prepared by SGR-CESGAR. 2.8% of companies requested this guarantee to collect subsidies and 2.5% to access public procurement processes.
What is technical endorsement?
The main objective of the technical guarantee is to guarantee the uruguay mobile phone number capacity of the SME or self-employed person to comply with the contractual obligations that they have entered into . It is generally requested to participate in public tenders and auctions, as well as to import goods on a temporary basis, the execution of works and supply contracts.
The guarantee for tendering, for example, allows companies to guarantee their legal and formal obligations to public bodies in order to comply with the requirements of current legislation. These may be provisional guarantees when they respond to a public tender called by public administrations, or definitive guarantees if, once the tender has been awarded, they are formalised to guarantee compliance with said contract for works or management of services and supplies.
The entity that guarantees you will be liable to your client for non-compliance with non-economic obligations . In a project, for example, it will cover possible deviations in terms of time, quality and cost. If you do not finish on time or the final quality is not satisfactory, the client for whom you work has the right to execute the guarantee and receive compensation for the damages caused. This does not mean that the guarantor entity will assume your services and will be responsible for finishing the project or solving the quality problems, but rather that it will compensate your client financially according to the damage caused and the conditions stipulated in the guarantee contract .
There are also technical guarantees specifically designed for companies that want to operate abroad, known as international guarantees . This guarantee allows the company to participate in tenders in the international market, covering the legal and formal obligations that the company acquires with public bodies in a foreign country. In these cases, it is most common for the bank of the destination country to grant a bank guarantee with a counter-guarantee from a SGR, which is what ultimately guarantees the company's activity.
It should be noted that technical guarantees are usually a more convenient alternative than surety bonds to ensure compliance with the commitment made to suppliers or public bodies. In fact, they usually cover larger amounts than surety bonds and do not establish exclusions by legal form, so they are accessible to self-employed workers and SMEs.
What is financial guarantee?
Financial guarantees focus on guaranteeing operations in which it is necessary to pay a certain amount within a specific period of time , covering the payment commitments and obligations that the SME or self-employed person enters into with another person or company. Financial guarantees are divided into two categories:
1. Commercial guarantee
The entity guarantees the payment of sums arising from commercial operations , such as: the purchase and sale of goods, the splitting of payments or payments on account. In some cases, revolving payments can be guaranteed, such as those made when supplies are delivered periodically.
Commercial guarantees are often used in sales transactions and are usually attached to the contract . In this case, the guarantor entity does assume your obligations, since they are of an economic nature. In fact, commercial guarantees are usually of a joint nature, which means that the guarantor entity will be responsible for all your obligations.
Guarantees are essential when applying for a loan or submitting a bid for a project, as they are a guarantee that an external entity will respond to the obligations you undertake. Obtaining a guarantee also gives more credibility to your company and improves its image, which increases the chances of accessing larger projects that allow you to grow.
To expand the horizon of your business you can use two types of guarantees : the technical guarantee or the economic guarantee, also called financial guarantee. The economic guarantee is the best known, since it is the one that banks usually request to grant a loan or line of credit to companies or self-employed workers. However, last year 4.7% of SMEs required technical guarantees to develop their activity, according to the XI Report on " SME Financing in Spain " prepared by SGR-CESGAR. 2.8% of companies requested this guarantee to collect subsidies and 2.5% to access public procurement processes.
What is technical endorsement?
The main objective of the technical guarantee is to guarantee the uruguay mobile phone number capacity of the SME or self-employed person to comply with the contractual obligations that they have entered into . It is generally requested to participate in public tenders and auctions, as well as to import goods on a temporary basis, the execution of works and supply contracts.
The guarantee for tendering, for example, allows companies to guarantee their legal and formal obligations to public bodies in order to comply with the requirements of current legislation. These may be provisional guarantees when they respond to a public tender called by public administrations, or definitive guarantees if, once the tender has been awarded, they are formalised to guarantee compliance with said contract for works or management of services and supplies.
The entity that guarantees you will be liable to your client for non-compliance with non-economic obligations . In a project, for example, it will cover possible deviations in terms of time, quality and cost. If you do not finish on time or the final quality is not satisfactory, the client for whom you work has the right to execute the guarantee and receive compensation for the damages caused. This does not mean that the guarantor entity will assume your services and will be responsible for finishing the project or solving the quality problems, but rather that it will compensate your client financially according to the damage caused and the conditions stipulated in the guarantee contract .
There are also technical guarantees specifically designed for companies that want to operate abroad, known as international guarantees . This guarantee allows the company to participate in tenders in the international market, covering the legal and formal obligations that the company acquires with public bodies in a foreign country. In these cases, it is most common for the bank of the destination country to grant a bank guarantee with a counter-guarantee from a SGR, which is what ultimately guarantees the company's activity.
It should be noted that technical guarantees are usually a more convenient alternative than surety bonds to ensure compliance with the commitment made to suppliers or public bodies. In fact, they usually cover larger amounts than surety bonds and do not establish exclusions by legal form, so they are accessible to self-employed workers and SMEs.
What is financial guarantee?
Financial guarantees focus on guaranteeing operations in which it is necessary to pay a certain amount within a specific period of time , covering the payment commitments and obligations that the SME or self-employed person enters into with another person or company. Financial guarantees are divided into two categories:
1. Commercial guarantee
The entity guarantees the payment of sums arising from commercial operations , such as: the purchase and sale of goods, the splitting of payments or payments on account. In some cases, revolving payments can be guaranteed, such as those made when supplies are delivered periodically.
Commercial guarantees are often used in sales transactions and are usually attached to the contract . In this case, the guarantor entity does assume your obligations, since they are of an economic nature. In fact, commercial guarantees are usually of a joint nature, which means that the guarantor entity will be responsible for all your obligations.