Security Instruments

There are a few different types of security instruments that can be used in procurement, and each has its own definition.

A Security Deposit is often required in order to secure the performance of a party under a contract. The amount of the security deposit is typically specified in the contract itself.

A Letter of Credit (LOC) is a type of financial guarantee that ensures that the supplier will receive payment for goods or services rendered, even if the buyer is unable to make payment.

A Performance Bond is another type of financial guarantee, but it specifically guarantees that the supplier will complete their contractual obligations in a timely and satisfactory manner. If they fail to do so, the buyer can file a claim with the surety company that issued the bond and receive compensation for damages incurred.