New Company & SPV Questions
Frequently Asked Questions
Expand a question for guidance on surety underwriting for newly incorporated companies, SPVs and joint ventures.
Can a newly formed company obtain a surety bond?
Potentially. The underwriter may need to look beyond the applicant itself to management experience, funding, ownership, group support and the underlying contract.
Can an SPV obtain a Performance Bond?
Potentially. Performance Bonds for SPVs can be considered where the wider project structure, management experience, financial support and contractual exposure can be understood.
Does a company need filed accounts before it can obtain a bond?
Not necessarily. Where filed accounts do not exist, a surety may consider opening balance-sheet information, management figures, funding, group support and other evidence appropriate to the case.
Can a startup contractor obtain a surety bond?
Potentially, although limited trading history can make the assessment more difficult. The experience of the management team, funding and project size may become particularly important.
How does a surety assess a company with no turnover?
The underwriter may focus on ownership, funding, management experience, opening financial position, group support and the commercial rationale behind the new entity.
Can a parent company support a new company's bond application?
Potentially. A stronger parent company may provide financial, operational or indemnity support depending on the structure and requirements of the surety market.
Does a new company always need a personal guarantee?
No. Personal guarantees may be requested in some cases, but the security structure depends on the wider underwriting position and the market approached.
Does a new company always need cash collateral?
No. Collateral may be requested by some markets or for some risks, but it is not a universal requirement for new-company surety bonds.
Why do some sureties decline SPVs?
Common concerns can include lack of trading history, limited standalone assets, reliance on one contract, unclear funding or insufficient support from the wider group.
Can another surety consider an SPV after one market declines?
Potentially. Different markets have different appetites for new companies and project-specific entities, although alternative placement cannot be guaranteed.
Can management experience compensate for limited company history?
It can be an important factor. Experienced directors who have successfully delivered comparable projects may provide useful evidence of operational capability.
Does the reason for setting up the SPV matter?
Yes. Understanding whether the SPV exists for project isolation, asset ownership, funding or another legitimate commercial reason helps the underwriter understand the structure.
Can an SPV with one large contract obtain a bond?
Potentially, although concentration in one contract means the surety may look closely at funding, management capability, project margin and support from the wider group.
Can a joint venture obtain a surety bond?
Potentially. The underwriting assessment may consider the financial strength, responsibilities and support of each JV participant as well as the structure of the joint venture itself.
Will a surety look at the accounts of related companies?
It may, particularly where the applicant depends on group funding or support and the standalone entity has limited financial history.
Can a newly formed company have a surety facility?
Potentially, although establishing ongoing capacity generally requires the surety to understand expected bond volumes, financial support, management experience and the wider business plan.