Surety bonds: flexible access to capital
A surety bond is essentially a promise or an undertaking by an insurer (the Surety) to pay to another party (the Obligee or Beneficiary) an agreed amount in the circumstances set out in the bond wording and in line with an underlying performance based contract.
Surety bonds are an unconditional and on-demand instrument providing an alternative to bank guarantees or retention monies. They are widely accepted in the Australian and New Zealand markets by Federal, State and Local Governments, public and private enterprises.
Benefits of surety bonds include:
The Bond facility is unsecured (no tangible security or cash collateral required), versus the banks’ secured position.
The facility allows greater financial flexibility by allowing companies to leverage off their capital base (better utilisation of their balance sheet), thus enhancing working capital and liquidity opportunities used and recognised in major trading countries worldwide
Provides companies certainty around expansion/growth and/or acquisition opportunities.
How surety bonds work
A surety bond is a three-way obligation between:
- The Contractor, who has the primary responsibility to perform the obligation;
- The Obligee or Beneficiary of the bond, and to whom the right of performance is owed; and
- The Surety, who has the responsibility to effectively secure, to the Obligee, obligations of the Contractor if the Contractor fails to perform.
Types of surety bond available
The product range of bonds available in Australia includes:
- Contract performance bonds
- Bid bonds (or tender bonds)
- Advance payment bonds
- Retention release bonds
- Off-site material bonds
- Maintenance/defects liability bonds
- Workers Compensation bonds
- Mining Rehabilitation bonds
- Other bonds at the discretion of the Surety provider
Have questions about surety bonds? Let's talk.
Call +61 8 6250 8847 to speak to a member of our Trade Credit and Surety team. Alternatively complete the form opposite and we'll get in touch at your preferred time.