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Share. A letter of guarantee is a document issued by your bank that ensures your supplier gets paid for the goods or services it provides to your company, in the event that your company itself can't pay. In that case, your bank will pay your supplier up to a specified amount.

An advance payment guarantee acts as collateral and protects the buyer's prepayment. If the seller defaults, the buyer recovers the prepayment amount. It is also called an advance payment bond. Sellers and contractors require prepayment for working capital, procuring raw materials, and paying wages.

Payment guarantees are financial commitments that require the debtor to make a repayment based on the terms outlined in the original debt agreement. Sometimes, the payment guarantee is backed with some form of collateral, such as property.

A warranty is a term of a contract, the breach of which entitles the innocent party to terminate the contract and claim damages, or affirm the contract despite the breach and claim damages In the consumer context, it is an obligation to repair or replace goods for a specified period.

Service warranty means any contract or agreement which indemnifies the holder of the contract or agreement for the cost of maintaining, repairing, or replacing tangible personal property, including motor vehicles.

The buyer or employer will, therefore, require the seller or contractor to provide an advance payment guarantee or bond for these payments.

There are many examples of warranties depending on the type of product a consumer is buying. Some examples may include replacing a product such as a mobile phone if it does not the way it is advertised. A consumer may also receive free repair services where a product has been damaged during use.