Capital Repayment Financial Guarantee Bonds are financial bonds that ensure the obligor (Borrower) will make payment to the obligee (lender/investor) The term “Capital Repayment financial guarantee” is used by Bond underwriters to assign additional risk to financial bonds that contain some form of payment obligation. It is important to note; however, that Capital Repayment Financial Guarantee bonds guaranteeing principal and interest payments on a loan are typical of this bond. This bond is a promise to be liable for the debt, default, or failure of another. It is a three-party contract by which one party (the surety) guarantees the performance or obligations of a second party (the principal) to a third party (the obligee).

Financial guarantee bonds are one of the main types of surety bonds. They are indemnity bonds which cannot be cancelled. Their goal is to guarantee all due payments that a party owes to another will be made in full and in due time.

Financial guarantee bonds constitute a three-party contractual agreement. The party that has to get bonded is the principal. The entity that requires the bonding is the obligee. The surety, or guarantor, is the underwriter of the bond, which provides the financial backing.

Because in essence they ensures payments, financial guarantee bonds work much like an extra line of credit for the bonded party. In case they fail to make a payment, the surety can temporarily take over and cover the outstanding amounts to the obligee.