Surety Bonds provide the same level of protection as do bank guarantees-but,
at a much more affordable price.
Instead of having to use traditional bank guarantees and similar lines of credit from financial institutions that can tie up your assets for a long period of time; Surety Bonds are designed to deliver flexible and affective bonding protection that allows you to free up your funds and reduce debt while meeting you contractual and guarantee obligations.
RGIB’ Insurance Broking provides specialised Surety Bonds products & services including for;
Contract Bonds - are primarily used in the construction and infrastructure sectors to cover performance obligations which can include a wide variety of contractual and performance risks including;
- Performance Bonds - provides security to the beneficiary against contractor non-performance or default, and supports contractor obligations.
- Bid Bonds - supports a contractor's bid or tender to ensure that they can enter into a contract if accepted.
- Advance Payment Bonds - secures the beneficiary's position on funds advanced to the contractor for capital purchases or site preparation.
- Retention Release Bonds - provides security to the beneficiary when the contractor is advanced funds from the retention fund.
- Maintenance Bonds - Secures a contractor's post-completion obligations during the warranty or latent defects period, usually 3-12 months post-completion.
- Off-Site Material Bonds - If goods or materials are held off site and paid for by the beneficiary, the bond responds if the goods or materials are not available when required for use in the contract.
Rental & Lease Bonds – are primarily used by Landlords to guarantee rental from commercial and industrial properties; should the tenant default on the rental payments, the bond will pay the ongoing rental commitment under the lease for the period agreed in the Bond.
The financial failure of a tenant can cause significant loss to a landlord because of;
- loss in terms of the time it takes to pursue the defaulting tenant;
- the time to find a replacement tenant;
- loss of rental in the interim period;
- outgoings which still need to be covered;
- loss in investment value while the property remains vacant;
- legal costs.
An additional benefit of a Rental & Lease Bond is that it effectively removes a landlord’s need for personal guarantees which are often problematic. In some instances a potentially good tenant walks away from a rental due to the insistence on a personal guarantee or bank guarantee which can be unnecessarily prohibitive and expensive.
Property Deposit Bonds – are designed to take the place of a cash deposit when purchasing a property; these types of bonds are primarily used by a property purchaser to guarantee the property vendor the value of the deposit without the need for the purchaser to actually pay the deposit in cash – this helps free up capital otherwise required to be pledged as security for a bank guarantee or similar cash facility from a financial institution.
If the purchaser defaults on its settlement obligations, the vendor can call up the value of the deposit ‘bond’.
This type of bond is particularly useful in situations where the property is still under construction. The vendor is able to secure the sale up-front and the purchaser can avoid having large sums of money tied up for a potentially lengthy period of time – indeed, most Deposit Bonds are issued for up to 36 months, for between 10–15% of the purchase price.
This is a great way for property vendors, developers and project financiers to appeal to larger selection of property investors and purchases as it is a substantially cheaper option than using a bank facility of similar arrangements with a financial institution.
Surety Bonds carry exactly the same obligations at law as a bank guarantee
Surety bonds are widely accepted by the private and government sectors and have a number of additional benefits such as;
- a bond facility is unsecured [no tangible security required] versus a bank’s secured position [you having to put up money or pledge assets];
- a bond facility allows greater financial flexibility by allowing you to leverage your capital base by better utilising your assets or balance sheet provisions thus, enhancing working capital and liquidity opportunities; and
- provide funding flexibility and options by not having to utilise your current banking lines for contingent liability purposes – no lazy capital.
RGIB’ provides a range of services for the Surety Bond market; with offices throughout the Australasian region including Australia and New Zealand, Vanuatu and other Pacific Nations, we’re able to assist in providing one contract to cover multiple bonding risks throughout most countries in our region.
We’ll provide you the necessary application documentation – if required one of our staff will come to see you and help complete the application; or we can arrange a video call such as on Skype where it’s just like having a meeting in person.
RGIB Surety Bond staff are well versed in Surety & contracting issues and have streamlined the application procedures to ensure a quick turnaround time.