Bonds

Bonds are not actually a form of insurance but are closely related. There are various kinds of bonds available, most of which are designed to give a financial guarantee that an agreement will be fulfilled or a financial penalty will be paid.

Bonds are most commonly taken by construction companies as a requirement of their contract or as part of their tender. Bonds are available from some banks, but they generally come at the expense of your overdraft, therefore restricting cash flow and working capital.

The most common kinds of bond we see are:

• Performance Bonds. These secure the performance of a contract or contractual obligation, normally covering 10% of the contract value.
• Advance Payment Bonds. These guarantee to an employer that, in the event of a breach of contract by the contractor, payment made before the contract commenced can be recovered under the bond, less any amounts certified under contract.
• Retention Bonds. These allow the employer to release retained monies held under a contract to the contractor to help with the contractor's cash flow.
• Street Works Bonds. These guarantee the completion and maintenance of roads and sewers until they are adopted for public use by the local authority.

For advice or a quote please contact us.

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