Discounting is a financial term. It means for a debtor to delay payment to a creditor for a given period of time by paying a charge or fee. Since a Bank Guarantee is already an instrument to secure a future or conditional payment to specific parties, Bank Guarantees cannot be discounted. Bank Guarantees cannot be divisible or transferable. This is a common error and arises from misunderstanding the terminology. When one refers to ‘discounting a Bank Guarantee’, they often mean to credit line or borrow money against it. I would imagine that the term is misconceived by the fact that securing loans against a Bank Guarantee is often given on a Loan to Value (LTV) of the Guarantee’s face amount. A credit line against a Bank Guarantee may be given as a percentage of its face amount; i.e. to borrow 90% of the Bank Guarantee’s value is a discounted’ amount of face value. Some may refer to the fact that they already have a Bank Guarantee to their account from a third party and are willing to ‘transfer’ it to a lender (or buyer) in return for immediate cash. Since Bank Guarantees are written to a specific party for a specific purpose, they cannot be transferred or divisible.
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