Deposit, bank guarantee and advance payment: how much cash do you need on signing day
Which guarantees are customary in commercial leasing, the difference between a deposit and a bank guarantee, what actually leaves your account — and what's open to negotiation.
Why property owners demand guarantees
A commercial lease is a commitment of hundreds of thousands of shekels over years. Guarantees are designed to protect the owner in case of payment defaults, damage to the property, or abandonment mid-term.
The customary toolkit in Israel combines three mechanisms: a cash deposit, a bank guarantee and advance payment. The exact mix — how many months of each — is a matter for negotiation, depending on the tenant's financial strength.
Deposit: the money sitting with the landlord
A deposit of 2–4 months' rent is held by the owner or in escrow, and returned at the end of the lease minus any debts and damage. This is cash that leaves the business on signing day and "sleeps" for the entire term.
Negotiation points: holding in escrow rather than direct with the landlord, indexation and return terms defined upfront (for example, 30 days from vacating), and reduction of the deposit after two years of timely payments.
Bank guarantee: doesn't leave your pocket — but not for free
An autonomous bank guarantee is the bank's commitment to pay the landlord up to a defined sum, usually 3–6 months' rent. The advantage for the tenant: the cash stays with you. The disadvantage: the bank demands its own guarantees — a locked deposit or credit line — and charges an annual fee.
In practice, a bank guarantee "locks" liquidity at the bank instead of with the landlord. Still, for the security of your cash it's almost always preferable to a direct deposit.
Advance payment and personal guarantee
Payment of one to three months upfront is customary mainly from new tenants without history. It's also common to sign a promissory note, sometimes with personal guarantors — a sensitive point for Ltd company owners, worth trying to limit or reduce to a specific amount and time.
Unlimited personal guarantee is the most dangerous element in the guarantee package. If there's no choice — limit it to a fixed sum and defined period.
How much cash to prepare: an example
For a 26,500 ₪ per month office with a customary request — a 3-month deposit and one month's advance — approximately 106,000 ₪ is needed on signing day, plus a bank guarantee of 3 months (approximately 80,000 ₪) secured by guarantees at the bank.
Walz's deposit calculator does the calculation for each property: enter the rent and terms, and get the total cash needed at entry and the scope of guarantees.
This article was written with the help of artificial intelligence and may contain inaccuracies. It should not be regarded as professional, legal or financial advice.
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