A variety of bonds and guarantees are required by a wide range of industries. Secure Trade Credit is a specialist in this area and can help clients put in place bond facilities with the surety market thus freeing up bank credit facilities.
One of the main differences between bonds issued by Banks and Surety Company bonds is that those issued by Banks are normally independent of the contract conditions and can be paid “on demand” With conditional Surety bonds the bond gives the contractor the protection of the contract. These conditional bonds require the Employer to prove that there has been a breach of the contractual obligations by the Contractor.
The other major advantage to the Contractor in using a Surety Company is financial. When a Bank issues bonds, they are offset against a company’s current Bank facilities thus tying up working capital facilities. When a Surety issues bonds borrowing facilities are not affected. Normally the only security required is a counter indemnity which is merely a reflection of the Surety Company’s common law rights to reclaim money paid out under a bond call.