Lockton Australia are specialists in securing, structuring and managing effective, competitively priced guarantee solutions for our clients.
Our aim is to optimise the use of surety bonds to improve flexibility and profitability of our clients business.
What are surety bonds?
A surety bond is a written guarantee from a highly rated financial institution, which can be provided in lieu of cash or a bank guarantee as security for the performance of a contract.
What is the difference between surety bonds and bank guarantees?
Both are unconditional, on demand guarantees. The difference is that surety bonds are issued by insurance companies and bank guarantees are issued by banks.
Why use surety bonds?
Unlike a bank, surety providers do not require security over the company’s assets and do not require the bonds to be supported by cash or other collateral. This allows the contractor to free up funds, reduce debt and tender for additional contracts. Surety bonds can also represent a cheaper alternative to bank guarantees with lower base rates and no utilisation or line fees.
Support the contractor’s obligations during a contract period providing security against non performance of the contract.
Secure post-completion obligations during the warranty or latent defects period, usually 12 months post completion.
Submitted with a bid or tender, they ensure that you will enter into the contract if the bid is accepted. A Bid Bond also ensures that a Performance Bond will be issued for the contract.
Advance Payment Bonds
Serve to secure the principal’s position where funds are advanced for the pre-purchase of equipment or site establishment costs.
Off Site Material Bonds
Cover the principal in respect of goods or materials produced and held off site. The Off Site Materials Bonds responds where the goods or materials are not made available when required for the contract.
Lease Performance Bonds
Issued at the request of a tenant in favour of their landlord and provide protection in lieu of a security deposit on a lease agreement.