Bank guarantee (teminat mektubu) in Türkiye: types, bank requirements, validity and use for foreign-owned companies

A bank guarantee (teminat mektubu) lets a company bid for a public tender, rent premises or clear goods through customs without paying a large cash deposit. The bank lends its name, not money, and charges a commission. This guide explains the main types, what a Turkish bank asks before issuing one, how validity works, and what is different when the applicant is a foreign-owned company.

What a teminat mektubu is

A bank guarantee (teminat mektubu) is a written undertaking by a bank to pay a named beneficiary up to a stated amount if the applicant fails to meet an obligation: to sign the contract after winning a tender, to complete works, to pay rent. Banks treat it as a non-cash credit (gayrinakdi kredi). No money leaves your account when the letter is issued, but the amount is deducted from your non-cash limit and you pay a commission for as long as the letter stays open. Three parties are involved: the applicant (your company), the beneficiary (a contracting authority, a landlord, a customs office) and the issuing bank. The wording of the letter decides when the bank must pay, so the beneficiary usually fixes the text and the bank adapts it only within its own standard forms. If the beneficiary makes a demand that complies with the letter, the bank pays and then recovers the sum from the applicant.

Main types and where each is used

A provisional letter (geçici teminat mektubu) is given at the tender stage to show that the bidder is serious and is returned to bidders who do not win. Under Law No. 4734 on Public Procurement, provisional security is at least 3 percent of the bid price, and Article 34 lists bank letters among accepted securities. A final letter (kesin teminat mektubu) is given after the award to secure performance; the general rate under Article 43 is 6 percent of the contract price, which the Authority may raise for bids below the threshold. An advance letter (avans teminat mektubu) secures an advance payment made before work starts. A customs letter (gümrük teminat mektubu) secures duties and taxes; customs accept letters without an end date drawn on the sample in Annex 77 of the Customs Regulation. A rent letter is offered to a landlord in place of a cash deposit; for residential and roofed commercial premises, Article 342 of the Code of Obligations caps the security at three months’ rent.

What the bank asks before issuing

The bank first needs a non-cash limit (gayrinakdi kredi limiti) large enough for the letter, a positive credit record and any collateral it requests. It reviews your financial statements, credit history and the nature of the work behind the letter. Even when these are in order, it may ask for cash blocking, a KGF cover (Kredi Garanti Fonu) or a mortgage. A company usually submits the tax certificate, the trade registry gazette, the signature circular, recent financial statements and a signed instruction (teminat mektubu talimatı) giving the beneficiary, amount, purpose and term. Banks also complete the know-your-customer file required by anti-laundering rules, including the natural persons who hold more than 25 percent. The commission is normally quoted as an annual rate, collected quarterly or half-yearly, and depends on the amount, your credit standing, the type of letter, whether it has an end date and the collateral. Ask the bank for its current commission and expense schedule in writing.

Validity, extension and return

A time-limited letter (süreli) lapses automatically on its expiry date. An open-ended letter (süresiz) has no end date and stays valid until the beneficiary returns it to the bank, which is why banks treat it as higher risk and often ask for firmer collateral; customs generally require this open-ended form. For a public tender, the tender documents set the form and period, so read them before you apply and ask the bank to match the text word for word. Provisional security serves until the contract is signed and is then released under Article 44 of Law No. 4734. When the work is finished, the beneficiary returns the original letter to the bank; commission then stops and the collateral is released. If the project runs late and the beneficiary asks for an extension, the bank must issue an amendment or a new letter before the expiry date, so start early. A letter returned late keeps costing commission, so track the return as carefully as the issue.

Foreign-owned companies: what changes

The law does not forbid a company with foreign shareholders from receiving a letter, and the bank applies the same credit test. The practical differences are mostly about information and track record. A newly formed company has no financial statements to show, so banks commonly ask for cash blocking or support from the shareholders in place of a limit built on history. Foreign shareholders must be identified through passports and, for corporate shareholders, registry extracts, signature documents and a chain up to the natural persons behind them; documents issued abroad normally need apostille and Turkish translation. The signatories of your Turkish company need an up-to-date signature circular, and the bank checks that the board decision authorises the instruction. A public tender may also require trade registry and tax documents in a specific form, so check the notice. Planning ahead matters: opening the account, building the limit and drafting the instruction are separate steps, and a tender deadline will not wait for them.

Sources

• mevzuat.gov.tr — Public Procurement Law No. 4734 (Arts. 27, 34, 43, 44), Code of Obligations No. 6098 (Art. 342), Banking Law No. 5411
• kik.gov.tr — Public Procurement Authority: tender legislation and guidance
• ticaret.gov.tr — Ministry of Trade, Customs: Customs Regulation (Arts. 495–497, Annex 77); Credit Registry query protocol read via the IGMD summary
• bddk.org.tr — BDDK: licensed banks list and credit regulation. Note: official pages could not be fetched, so consolidated and bank copies (Lexpera, Akbank) were used; check the current text before filing

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