A Surety bond is a contract of guarantee consisting of three parties:
– Contractor
– Surety (Bond issuer)
– Principal (beneficiary).
Under the bond, the Surety undertakes to hold itself responsible up to the specified amount for the non-performance i.e. the obligation of the Contractor. If the Contractor defaults, the Principal may claim the amount of their loss up to the specified amount from the Surety in accordance with the terms of the bond. The Surety, acting as guarantor, will pay the Principal’s loss up to the amount of the bond, and claim the amount of such payment from the Contractor.
Benefits of Surety Bonds
- Bonds are a widely accepted form of contract security (an alternative to bank guarantee) and are accepted by the private sector, federal, state and local municipalities.
- Are flexible and operate alongside traditional banking facilities.
- No tangible security or collateral required, thereby freeing up assets for other purposes, i.e. growth of the business or procurement of additional working capital
- Bond Facilities allows Contractors to free up funds and reduce debt and tender for more contracts without being restricted by security requirements.
- Bond Facilities allow for greater financial flexibility by allowing the company to leverage its capital base and therefore utilise assets more cost effectively.
- Provides the company funding flexibility / options by not having to utilise its banking lines.
Chase Surety Contract Bonds
Contract Bonds provide protection against contract non-performance or default. They are an industry recognised, genuine alternative to bank guarantees and allow the contractor to manage their capital more efficiently. Contract Bonds offered by Chase Surety include:
- Retention Release: Provides security to the beneficiary when the contractor is advanced funds from the retention fund.
- Off Site Material: Secures the Obligee where payment to the contractor for items to be constructed or held off site has occurred but delivery of the goods has not taken place. The bond responds if the goods or materials are not available when required for use in the contract – with the bonds reducing when goods or materials are fixed to the site.
- Bid/Tender: Supports a contractor’s bid or tender to ensure that they will enter into a contract if accepted.
- Performance Bonds: Provides security to the Obligee against the contractors non-performance or default during the contracted period.
- Maintenance Bonds: Secures the contractor’s obligations during the warranty or latent defects period.
- Advance Payment: Secures the Obiligee’s position on funds advanced to the contractor for capital purchases or site preparation (in advance of works being completed).
Surety Bond Application Process
Chase Surety works with clients to understand their business in a timely manner. Successful applicants will be able to evidence:
- A track record of financial strength and stability
- Technical ability to deliver on all contractual requirements
- Risk management processes, controls and culture
- Evidence of professional financial and operational management
- Financial considerations include:
- Minimum revenue of $50 Million per annum
- Minimum net tangible worth of $5 Million
- Appropriate leverage metrics (i.e. understanding potential exposures from existing/future debt facilities)
- Positive cash flow
- Positive working capital
- At least 3 years of continuous profitability
About Chase Surety
Chase Surety is a specialist provider of Surety Bond solutions in Australia. Chase Surety was established in 2015 to be a leader in the provision of Surety Bond solutions to Clients across industries including general construction, infrastructure, telecommunications, engineering, mining and oil & gas in Australia.
Surety Bonds are an industry recognised, genuine alternative to bank guarantees and allow the contractor to manage their capital more efficiently.
Chase Surety is a subsidiary of Chase Underwriting, a specialist provider of construction insurance solutions across Australia.
Contact Chase Surety
Level 1, 68 Clarke Street, Southbank, VIC 3006
T 03 8866 0700
E info@chasesurety.com.au
© 2015 Chase Surety Pty Ltd AFSL 454344 ABN 84 604 035 378