Retention Bonds
What is a Retention Bond?
A retention bond will provide the employer with the same level of comfort as the contract retention, but freeing up the money and returning the money to your account.
How Do Retention Bonds Work?
It's common for retentions to be requested within construction contracts. Retention Bonds provide the employer with the same level of comfort as the retention but freeing up the money for the contractor's cash flow.
Why Do You Need A Retention Bond
Retention Guarantee in Construction Contracts may request that they hold up to 5% of the contract value (a retention) for a period of up to 12 months. You will then have to wait for the funds to be returned at the end of the making good of defect period, this can affect your cash-flow, however a Retention Money Bond is an alternative solution.
Avoid Issues Associated With Retention Recovery.
Often Contractors report issues in recovering retentions, the time and effort involved in chasing the money from the Employer can be detrimental to their business. Employers can use the Retention as leverage over the Contractor which puts them in a difficult position, however, putting in place a Retention Guarantee Bond will avoid these issues.
Why Use Surety Bonds and Guarantees?
The placement of a Retention Money Bond through the surety market, as alternatives to bank guarantees, can help companies by keeping bank facilities available to meet cash flow requirements.
A Retention Guarantee Bond is a written promises to pay for direct loss or damage suffered by a third party as a result of a breach of contract. Many types of bond or guarantee are available for almost any area of risk, subject to underlying security and the risk being acceptable to the guarantor.
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Retention Bond vs Performance Bond
A Performance Bond focuses on the contract default and provides compensation to the Employer should there be an issue in the ability of the Contractor to complete the works. However a Retention Bond releases the contract retention from the start, aiding the Contractors cash flow and decreasing the chances of default from financial pressures. Both offer different parties different benefits and are often issued together on the same Contract.
Other Bonds Commonly Requested include;
Performance Bond
The most common Bond we are asked to place are Performance Bonds, a Performance Bond provides the employer with between 5% and 20% (most commonly 10%) of a contract value in the event of a contractor or supplier failing to perform to the agreed terms. Any company can use Performance Bonds, but are more common in the construction or service industry sectors.
We are able to quote any size of performance bonds with the most competitive terms often without the need for any cash collateral. We can provide Bonds on either standard ABI wording or can have the employers wording agreed if required.
Road and Sewer Bond
A guarantee, on behalf of a property developer or house builder, to complete the roads and sewers for handover to the appropriate local authority, in line with the relevant Highways or Water Industry Acts.
Advanced / Stage Payment Bond
Advance or stage payment bonds provide security for customers by protecting payments in advance of the goods or services being delivered. Designed for all companies of any trading status, particularly those in the construction sector.
Duty Deferment / Custom Bonds
Duty and VAT are payable immediately on import at the UK border. A duty deferment or custom bond gives companies that import goods from outside the EU the flexibility to ease cash flow by deferring payment for a given period. These Bonds cover any company that imports goods.
Reinstatement Bond
Usually issued in favour of a local authority or the Environment Agency, reinstatement bonds guarantee the restoration of land to agreed standards after quarrying, opencast mining or waste disposal.
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