Advance Payment Guarantees (APG)

This is issued as a security against a payment being made upfront to the contractor by the procuring entity to facilitate mobilization activities for the contract awarded. We Everpro consultants will assist you to get an APG both secured and non-secured from PPOA accredited institutions.

The issuer’s obligation may be primary (as in an on-demand obligation or indemnity) or secondary (as in a guarantee). An advance payment guarantee or bond is typically used to underpin or guarantee the performance of a commercial contract, such as a contract for the sale of goods (where the buyer is the beneficiary) or a construction contract (where the employer is the beneficiary). For example, a buyer or employer may make down or advance payments to a seller or contractor to provide it with funds to purchase necessary materials or machinery or otherwise prepare itself to perform the contract. The buyer or employer will wish to ensure that if the seller or contractor fails (perhaps because of insolvency) to deliver the goods or perform the services in accordance with the contract then, at the very least, it can recover the payments made to the seller or contractor. The buyer or employer will, therefore, require the seller or contractor to provide an advance payment guarantee or bond for these payments. The guarantee or bond will provide that if the seller or contractor fails to meet its contractual obligations, the issuer will refund the advance payments made by the buyer or employer.

The most common payment guarantee in Kenya is known as the Advance Payment Guarantee. This is a guarantee issued to enable the contractor/supplier c to collect mobilization fees for the contract won. Here the bank becomes liable if, after the collection of the advance monies, the contractor/supplier fails to deliver the project as per the laid terms of the contract.

As with performance bonds, the conditions of the advance payment guarantees must be in line with the contract awarded and collateral will be required to be able to issue an advance payment guarantee on behalf of a client.

At everpro consultants, we work very closely with businesses to ensure they meet their business objectives by taking advantage of all the potential business opportunities out there. These guarantees are an indicator of the bank’s confidence in your businesses and at the same time protect the project owners’ interests.

6 thoughts on “Advance Payment Guarantees (APG)

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