Bonds and guarantees are a form of security that provides the financial protection that supports a contractual obligation.
A bond or guarantee is not a debt instrument or loan in itself. It is a guarantee by an insurance company that they will assume the cost, if an applicant defaults on its liabilities or obligations.
A guarantee encourages companies to make purchases or deliver services they otherwise would not have made. This in turn increases business activity and consumption and provides entrepreneurial opportunities.
The insurer offers to stand as the guarantor on behalf of the company in a transaction.