Advance Payment Guarantee
Category: Payments
Definition (plain English)
An advance payment guarantee protects a buyer by requiring a bank or guarantor to repay an advance if the supplier fails to perform under the agreed conditions.
Why it matters commercially
It can make deposits or tooling advances safer, but weak wording or an unacceptable bank can leave the buyer with little practical recovery.
Example
A buyer released a 40% machinery deposit only after receiving an advance payment guarantee matching the deposit amount and production milestone schedule.
Common mistake
Paying an advance before confirming guarantee authenticity, expiry, claim process, bank acceptability, covered amount, and refund trigger.
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