Performance Bonds have become a key part of a developers risk management strategy
What is a performance bond?
The current market conditions have many construction firms considering their risk management strategy.
A performance bond is a surety bond issued by an insurance company (or in some instances a bank) to guarantee satisfactory completion of a project by a contractor.
A recent article from Construction News illustrated that:
- 36 construction companies fell into administration in February 2020
- 246 companies were involved in stages of liquidation
- 82 formally held meetings with creditors
Key benefits of Performance bond:
- Being able to offer such bonds and guarantees can be essential when bidding for contracts, as the failure to do so may ultimately lead to exclusion from the tendering process.
- In essence, a Performance Bond helps both the developer and contractor enter into contracts with peace of mind and acts as a surety to ensure satisfactory completion of an agreed project.
- It should be viewed as a viable alternative to Bank Bonds and Letters of Credit which often require working capital to be ring-fenced for the duration of the contract. By purchasing a Performance Bond, contractor liquidity is significantly enhanced.
- As a Performance Bond is a common requirement for Infrastructure, Government or Housing Association projects, having a proven avenue for organising this type of Bond gives your company the ability to respond to more tenders.
Performance Bonds for the Construction Industry
Construction disputes are expensive and time consuming – We want to help keep both developers and contractors building.
We have a high success rate in securing Performance Bonds for our clients, having helped many contractors reduce their dependency on bank borrowing and free up to their own working capital.
When securing a Performance Bond, our only interest is in you, our client. We ensure that you are getting the best price and correct bond for your project available in the market without a vested interest.
To ensure that you are protected or if you have been asked to put a bond in place, speak to our specialist team on 020 3701 0422