Your Surety Bond Specialist
FinCred specialises in brokering surety bonds for the construction sector, providing bonds in support of construction contracts or supply only contracts within the sector. Most commonly; performance bonds, advance payments bonds and retention payment bonds.
Surety bonds are typically issued by banks, which can tie up important lines of credit. By obtaining the bond you need through our network of partners in the insurance sector, FinCred can deliver a solution tailored to your unique requirements offering increased banking capacity and the financial margin to grow your business.
If you operate in the construction sector and want to discuss how surety bonds can help your business, contact us today.
What is a Surety Bond?
A surety bond is a surety guarantee, issued by an insurance or surety company, providing the security of financial indemnity in the event that your contractor, sub-contractor or supplier fails to perform their contractual obligations.
Surety bonds also serve to meet the statutory or regulatory requirements of Government agencies or other regulatory bodies such as HMRC, the environment agency, and local Government authorities.
When Do You Need a Surety Bond?
Public and private construction projects may require a surety performance bond as a prerequisite for the award of the contract or subcontract. The nature of the works or the structure of the contract may also lend themselves to advance payment and/or retention guarantees.
What Parties are Involved in a Surety Bond?
Although often referred to as insurance, and despite the fact that it is predominantly insurance companies who provide our guarantee bond requirements, a surety bond is not a contract of insurance.
There are three parties involved in a surety bond (legal terminology in brackets):
- The party doing the work (the principal).
- The party requesting the work (the obligee).
- The bond issuer (the surety).
In the event that the first party fails to perform their contractual obligations to the second party, resulting in a proven contractual financial loss, the second party requests indemnification payment from the guarantor up to the level of the guarantee bond value.
The key difference, when compared with insurance, is that the surety guarantor then seeks reimbursement from the first party.
FinCred is a specialist insurance broker helping our clients find suitable and competitive surety solutions through our trusted network of surety and insurance companies.
Example of a Surety Bond
A common type of surety bond is a construction bond. Take a construction project that is awarded to a contractor by a government agency to build a hospital or road.
To ensure that the building work is completed in an appropriate manner, and within a certain timescale, the government agency will request that the construction company purchase a surety bond that binds them to complete the work in a compliant manner.
If these obligations are not met, the agency can claim from their surety insurance, and the construction company will be liable to compensate the insurance company.
What Are The Different Types Of Surety Bonds?
It can be confusing to find the product that is right for you. FinCred is an expert surety bond broker. If you are looking for help choosing a surety bond for your business, don’t hesitate to contact us.
There are a wide range of surety bond insurance products. Below are the definitions of each available bond.
Performance Bond Insurance
A guarantee to the employer or main contractor that the contractor or subcontractor will fulfil their contractual obligations and if they fail to do so, that the guarantor will pay the damages sustained by the main contractor or employer, as ascertained and established under the contract terms and conditions, up to the value of the bond which is typically 10% of the contract value.
Bonds that ensure land will be returned to an agreed state after a project is completed.
Retention Bond Insurance
A guarantee which enables the release of the whole of each certified payment to the main contractor or subcontractor including what would otherwise have been the portion retained pending release at practical completion and making good defects.
Guarantees that the main contractor or subcontractor will fulfil their contractual obligations and that if they fail to do so, that the guarantor will pay the damages sustained by the main contractor or employer, as ascertained and established under the contract terms and conditions up to the amount of the bonded retention value.
Advance Payment Bond
A guarantee to the employer or main contractor that contractual payments they have made in advance will be used and applied in accordance with the contract terms and conditions. In the event of failure to do so, the guarantor pays the damages sustained by the main contractor or employer as ascertained and established under the contract terms up to the amount of the bonded advance payment value.
Duty Deferment Bonds
A guarantee of payment of relevant taxes and duties to HMRC, allowing HMRC to offer deferred payment terms to the importer for up to 45 days. This enables the importation and distribution of the goods prior to the payment of the tax and duty, thereby easing pressure on cash flow.
A bid or tender bond is a guarantee under which a party seeking contractual tenders seeks protection against, and compensation for, additional costs, expenses delays and contractual value differences if the successful bidder then fails to enter into the contract in accordance with their tender.
These bonds are very uncommon in the UK and are often required to be payable on demand (rather than after ascertainment of actual loss suffered), and therefore are far more likely to be sourced from banks than from insurers and surety companies.
Construction Guarantee Bond
A performance bond specifically geared towards the construction sector and certain forms of construction contracts.
Road and Sewer Bond
A guarantee taken out on the behalf of a property developer to ensure roads and sewers are completed to the necessary standards under the Highways and Water Industry Acts.
Need Help Finding The Right Surety Bond?
Don’t take chances when trying to find surety bonds. By using FinCred’s surety bond service, you ensure a multitude of benefits for your business:
- Security: Gain comfort knowing you are complying with the required laws.
- Choice: Access a wide range of regulated surety bond providers from FinCred’s trusted and reliable network.
- Cost: Maximise your cost/benefit ratio.
- Expertise: Utilise the advice and backing of a surety expert with decades of experience in the industry.
FinCred are experts in surety bonds, performance bonds, construction bonds and many other types of surety insurance. We are your partner in insurance and have the best interests of our customers at heart.
If you want to find the best surety agreement for your business, contact us today.