Bank guarantees are widely required in UAE business. Here is the complete 2025 guide to UAE bank guarantees.
What is a UAE Bank Guarantee?
A UAE bank guarantee (BG) is a commitment by a UAE bank to pay a specified sum to a third party (the beneficiary) if the guarantee holder (your business) fails to meet a contractual obligation. Bank guarantees are commonly required in UAE for: government tenders (bid bond guarantee), government contract performance (performance bond guarantee), customs duties (customs bank guarantee), free zone visa sponsorship (some free zones require a BG per employee visa), lease agreements (landlord requires a bank guarantee instead of or in addition to post-dated cheques), utility connections (DEWA, ADDC often require a bank guarantee for connection), and labour supply companies (MOHRE requirement for labour supply licences).
Types of UAE Bank Guarantees
Bid Bond Guarantee: required for government tenders. Typically 2-5% of tender value. Released if you are not selected, or converted to performance bond if you win. Performance Bond Guarantee: required when you win a government or large corporate contract. Typically 5-10% of contract value. Released upon satisfactory project completion. Payment Guarantee: guarantees payment to a supplier. Used in import/export trade finance. Advance Payment Guarantee: protects a client who has paid an advance — guarantees the advance will be returned if you fail to deliver. Labour Guarantee: required by MOHRE for certain employer types (labour supply companies).
How to Get a UAE Bank Guarantee
Apply at your UAE bank: provides the BG facility. Collateral: cash margin (typically 100% of the BG value held in a blocked account), or as part of a banking credit facility (if you have a credit limit with the bank). Cost: BG issuance fee: 0.5-1.5% of BG value per year. Plus stamp fee and service charges.