Why's my buyer placing an order & asking ME to get banker's guarantee? HELP!!!!!!! Please!! :(?

Question

this east indian company placed an order of about US$300k from my company and because we manufacture the goods, we needed the money first to purchase raw materials and bottles.

however after days of delaying the 50% deposit first, they tell us that over at their side, their bank told them that remits over USD 100,000 would require US to give them a banker's guarantee. which doesn't make sense to me because THEY are buying from us, and they tell us that we are the ones having to come up with the 50% amount as a collateral in a fixed deposit account before they can remit the 50% to our account.

i thought that bank's guarantee are placed by the buyer NOT by the seller. plus even if i do put that amount as a collateral, that means they would have ZERO risk in purchasing the products, because they could then find fault with it and take their money back AND my money. so please, let me know what's going on because i have a feeling that they're pulling a fast one on me. thanks alot :')

Answer 1

You are right to extend that it is Buyer who should provide you Bank Guarantee, for the payment.

Thus, you could have negotiated for 'Letter of Credit' for the value of despatches, you are likely to make. Since you have demanded 50 % advance, toward the cost of Raw Material. There Risk is involved to that extend. That's why they are asking for Bank Guarantee, to that extend. The demand in context is in order.

You shall go ahead and provide them Bank Guarantee, to the extend you are seeking advance.

Good Luck !!