The volume of trade financing deals organised by the Citadele Bank during the first quarter of 2015 increased by 20% in comparison to the same period last year. This is largely down to bank guarantees and encashment services. The number of bank guarantees increased by 36% in comparison to the same period in 2014, with most guarantees being provided for construction companies, particularly those that build roads. Companies often use bank guarantees for state and local government procurements and bids for tender, as well as to conclude partnership agreements to ensure that all partners satisfy their obligations.
“Work with companies is a priority for the Citadele Bank,” says board member Santa Purgaile. “In addition to classical financing, we offer loans, leasing services and payment card services. Many businesspeople use our bank’s guarantees to pursue their goals. These mostly ensure that partners will carry out their obligations or undertake additional ones. Companies are welcome to visit us to learn more about the advantages of the guarantees, because until May 15, reviews of applications in this area are free of charge. This is an opportunity to find out whether the financial solution that we are offering will be advantageous for a specific company in a specific situation.”
Bank guarantees are most often used by construction, retail and other companies so that they can feel safe about partners from other countries or take part in a bid for tenders here in Latvia. Collateral for Citadele guarantees includes money, term deposits, commercial pledges, other mortgages and guarantees from other people.
The finance director for the RBSSKALS Group, Arnis Zaščerinskis, says that his company has enjoyed positive co-operation with the Citadele Bank in the area of guarantees in the past. The range of guarantees is usually between EUR 9 million and 12 million. The RBSSKALS Group mostly uses offer guarantees, contractual performance, guarantees, advance guarantees, guarantee period guarantees, and other guarantees that relate to state, local government and private bids for tender. Zaščerinskis says that such guarantees are needed in 99.9% of cases. Guarantees for the RBSSKALS Group at this time support many construction and reconstruction projects, including the construction of a set of educational and workshop buildings, as well as a dormitory, for the Liepāja State Technical School, installation of information and video observation systems in terms of modernising the rail passenger infrastructure at 16 train stations in Latvia, reconstruction of the buildings and infrastructure of the No. 1 and No. 2 high schools in Malta, etc.
SIA PRO DEV, which is another construction firm, mostly uses Citadele guarantees to take part in bids for tender related to construction, reconstruction, energy efficiency, etc. Each project usually needs several types of guarantees such as contractual performance guarantees and guarantee period risk assurance. If the company has to ensure the guarantee sum demanded by the organisers of the bid for tenders from its everyday cash flow, that would mean reserving resources in a manner that does not facilitate development, says SIA PRO DEV board member Juris Spīķis. Right now the company is using Citadele guarantees to reconstruction a workshop building into an office and laboratory building for the Latvian Hydro-Ecology Institute, with a total contractual sum of EUR 710,000. Spīķis says that of great importance in guarantees are good services, timely preparation of documents, etc.
“We prepare guarantee agreements in two or three business days in most cases if the collateral is cash or a term deposit, or in two weeks if there is some other kind of collateral,” says Santa Purgaile. “The time that is needed also depends, of course, on the work of both sides in the deal. Once the agreement is signed, we can transfer the guarantee funds in just a few hours and no more than one business day.”