The bank guarantee also signifies that the lending institution ensures that the liabilities of a debtor are going to be met.
In other words, if the debtor fails to perform the obligation, the bank will cover it.
A bank guarantee allows the customer, or debtor, to acquire goods, purchase equipment or draw down a loan.
[1] A bank guarantee is a promise from a bank or other lending institution that if a particular borrower defaults, the bank will cover the loss.
A bank guarantee is similar to, but not the same as a letter of credit.