Surety, Trade Credit & Political Risk
BCS are proud to be a member of the Australian Surety Association.
Surety Bonds are a valuable alternative to Bank Guarantees and Cash Retentions as well as an effective way of increasing clients’ capital base.
Unlike Bank Guarantees, which are supported by collateral and tie up valuable working capital or other assets, Surety providers evaluate the performance risk of the client and its ability to meet contractual obligations.
Surety is a credit instrument known as a bond guarantee. It is not an insurance product.
Surety Bonds can be unconditional, irrevocable, payable on demand or conditional, aligned to conditions precedent being met prior to a payment under the bond.
You can view our Surety Bond Brochure here
What is a Surety Bond?
Surety bonds are an alternative to Bank Guarantees and Cash Retentions. Surety bonds are unconditional, irrevocable and payable on demand, in the same way a bank guarantee is.
What are the benefits of a Surety Bond?
Surety bonds are unsecured, meaning they do not tie up your working capital or assets, allowing your business to grow.
In Queensland, with the introduction of Project Bank Accounts (PBA’s), surety bonds eliminate the requirement for cash retentions to be managed in a trust account – freeing up your time in administration.
Types of Bonds Available?
Bond types we can provide include, but are not limited to;
- Performance Bonds – provide security for your client against default or non-performance
- Maintenance Bonds – cover your post-completion obligations during the warranty or latent defects period, usually 12 months from practical completion
- Advance Payment Bonds – cover your client when they advance you money to pre-purchase equipment or establish a site
- Retention Release Bonds – provide security for your client when they advance you money from their retention fund
- Bid Bonds – are submitted with your bid or tender to ensure you’ll enter into a contract if your bid is accepted. They also guarantee a Performance Bond will be supplied
- Off-Site Material Bonds – cover your client for goods or materials produced and held off-site and paid for by them (if they’re not available when required).
- Mining Rehabilitation Bonds – issued to respective state governments on behalf of mining companies to ensure rehabilitation of the site at the end of a mine’s operating life.
- Credit Enhancement Bonds – issued to banks on behalf of developers for their pre-sales commitments.
What is the difference between a Bank Guarantee and Surety Bond?
They both have the same purpose, however bank guarantees are secured by cash or assets, whereas Surety Bonds are unsecured. They are both payable on demand and have the same wording and legal obligations. They are both subject to the same claims process; it is stressed that there is no requirement to prove that there has been a lack of performance or any further justification for making the claim, due to the document being ‘payable on demand’.
How are Surety Bonds provided 'Unsecured'?
Surety providers evaluate the performance risk of the client and its ability to meet contractual obligations. Due to bonds being unsecured, there are minimum requirements which must be met by each company to be considered for a surety bond facility.
Who are the Surety Providers?
At BCS, we only deal with companies who have an S&P Rating of A- or better. It is an important element in the acceptance by the Principals, that your surety is sound and has the ability to meet the provisions of their product. In many cases, the surety companies have an equal rating with the big banks.
Will my Surety Bond be accepted by the Principal/Beneficiary?
Bonds are accepted Australia-wide as a form of contract security for most principals, including local, state and federal government departments. However, should a bond not be accepted for any reason, the introduction of ‘bank fronting’ allows the surety bond to be presented as a ‘bank guarantee’ on paper rented from the bank, for a small additional cost.
How long does it take to get a Surety Bond?
Once your facility is established, bonds can be turned around in 24 hours. It is as simple as completing a standard application form.
Bank fronted bonds take a little longer, generally 48 hours from draft approval.
How can I be considered for a Surety Bond facility?
As surety bonds are unsecured, there are minimum requirements which must be met;
- A minimum turnover of $20M
- A solid training record with a level of continuous profitability
- Strong financial resources, including good net equity
- Experienced and stable management
- Technical capability to deliver your contractual obligations
Why should I use BCS Broking?
We assist our Clients with managing their bonding requirements from start to finish.
From setting up a facility, negotiating your rates and fees, applying for bonds, swapping out current cash retentions, following up on the return of bonds, assisting with the annual facility renewal including all negotiations, to educating your staff on surety bonds and how to use them.
Surety Bonds is what we do! We determine which facility provider would be the best fit for your business and ensure you are getting the best deal.
We provide solutions to protect your business against trade risks such as delayed payments, bad debt and insolvency. Benefits of Trade Credit Insurance:
- Improve confidence and security of your financial partners
- Enhance your balance sheet through reducing bad debt risks and managing right offs with certainty
- Reduce financial risk and preserve your profit
We provide political risk solutions for multiple buyers, multiple years and across multiple countries with a global capacity exceeding AUD $1,000,000,000.
Global organisation and investors often have assets in offshore locations, which if administered by a foreign government become exposed to political risk (sovereign/country risk).
In certain regions, foreign governments have confiscated property at the investors detriment, affecting the ability to source new materials, secure and manage contracts with overseas suppliers, set terms of trade and effect financial liquidity. Political risk can also include expropriation, civil war, forced abandonment and currency blockage.