Guarantee 
Guarantee is a type of collateral agreement whose value is calculated as a percentage of the receivable that it collateralizes.
Use
Salient features of guarantees supported in Collateral Management are:
Master data specific to guarantees
Classification
Valued as a percentage of the receivable
The value of a guarantee is calculated as a percentage of the receivables being secured by the guarantee.
Default liability
The liability of the guarantor is limited to the amount mentioned in the guarantee deed and does not depend on the value of the receivables. You can specify a default liability as the assessment amount or as the default rate (percentage of the receivables being collateralized).
Term guarantee
The validity period of the guarantee may not be the same as the validity period for the receivables being collateralized.
Direct enforceability
The guarantor is directly liable for payment of the default amount of the receivable while the borrower is not even required to liquidate his property.
Co-guarantee
A receivable having several guarantors, all of whom are liable to pay the total amount of the guarantee.
Counter guarantee
A guarantee backing another guarantee where the counter guarantor is liable to pay the main debtor.
Authorities approval
In scenarios where the approval of legal authorities is necessary to release a guarantee, then you must specify if the authorities approval is available.
Lending rate
The guarantee rate that the system uses to calculate the lending limit for a guarantee.
Credit insurance cover
In the scenario for export credit insurance where the export credit agencies collateralize exporters against various possible risks, you can specify the type of risk being collateralized by the guarantee. Some examples of such risks include economic risk, political risk and country risk.
Business scenarios for guarantees
You can create separate collateral agreement types to support the following business requirements for the various guarantee types such as the following:
Hard letter of comfort
In the hard letter of comfort the parent company assumes, vis-à-vis the credit giver of it’s sister concern, legally binding obligation to provide it’s sister concern with financial support so that it can fulfill it’s liabilities from the credit obligation within the stipulated period
Letter of Credit
A Letter of credit is a declaration by the bank to pay a certain amount to the beneficiary of the letter of credit, for the account of the customer
Hermes cover
Guarantor is Hermes Kreditversicherungen AG, a national credit insurance company. The guarantee issued by Hermes is given directly to the bank in case of a special type of exporter credit (Bestellerkredite).
Exemption from liability
A special type of bank (KfW) indirectly grants a loan through a bank to a customer of this bank. The bank will be exempted from liability by the third party bank KfW in this case. In case of liquidation the third party bank will take over the whole loss from the exempted loan
Credit order
It is an order to the bank from a company A (normally) to issue a credit to another company B. This can be used, as the Guarantee by the bank against its liabilities of company B. Company A becomes the co-obligor in this scenario.
Calculations for guarantees
Since the guarantee value is calculated as a percentage of the receivable, the assessment value of a guarantee is equal to the percentage of the value of all the receivables collateralized. The collateral value for guarantees is calculated both according to the maximum risk and the current risk.
For detailed information on how calculations are performed for each calculation parameter with respect to guarantees, see:
Collateral Calculations
For detailed information on the structure of a collateral agreement, see