Why use a Retention Bond instead of cash retention?

Using a Retention Bond improves cash flow for the contractor or subcontractor while still giving the employer comfort that defects or incomplete items will be addressed. It removes the need to have money tied up for the defects liability period and can support working capital on longer term projects.

Can Retention Bonds be used with JCT and NEC contracts?

Yes. We can arrange Retention Bonds to match the wording or requirements of JCT and NEC contracts, and we can review employer or main contractor wordings when a specific form is required. Our aim is to align the bond with the contract provisions while keeping the wording acceptable to the surety.

Do Retention Bonds require indemnity or security?

As with other surety bonds, a company indemnity is normally required from the contracting entity. For larger bond amounts or where financial information is limited, the surety may ask for additional comfort, but we will always aim for the lowest level of security that is acceptable to our markets.

What information is needed to apply for a Retention Bond?

We typically ask for a completed application form, recent financial statements, management accounts where available, details of the contract and retention percentage, and a copy of any proposed bond wording or contract clauses that describe the retention bond requirement.

Retention Bonds

What is a Retention Bond?

A Retention Bond is a UK construction surety that replaces the traditional cash retention and guarantees the contractor’s obligation to remedy defects or outstanding work during the defects liability period. It allows the contractor to improve cash-flow while providing the employer or client with a guarantee that funds will be available if the contractor fails to fulfil their obligations.

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.

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.

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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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.

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Retention Bonds

What is a Retention Bond?

How Do Retention Bonds Work?

Why Do You Need A Retention Bond

Avoid Issues Associated With Retention Recovery

Retention Bond vs Performance Bond

Why Use Surety Bonds and Guarantees?

Call now to speak to one of our specialist Bond Brokers – 02476 017646

Other Bonds Commonly Requested include;

Performance Bond

Road and Sewer Bond

Advanced / Stage Payment Bond

Call now to speak to one of our specialist Bond Brokers – 02476 017646

GET A QUOTE

Brokers