Bank Guarantees

As the name suggests, Bank Guarantees are a guarantee or surety provided by your bank to a landlord or supplier in lieu of a cash security deposit. With newsagency businesses there are several instances where a bank guarantee may be required. These can include:

Landlords: May require bank guarantee for up to 3 months rent

State Transit Authority: For travel tickets held for sale

Suppliers: Some newspaper and magazine suppliers require a bond

Australia Post: May require a guarantee for stocks held

It is very important to remember that guarantees provided by banks form part of the total loan facilities provided to assist you to purchase the business. If, for example, I know that the maximum the bank can lend on your available assets is $500,000 and the total value of bank guarantees required is $25,000, then this leaves a maximum of available funds of $475,000 to be applied to the newsagency purchase.

Banks charge an annual fee for Bank guarantees which, depending on the amount of the guarantees provided, is usually between 2-4% per annum.