Performance bond in construction industry is vital for you to get ahead of your competition. They are much better than obsolete bank guarantees that require collateral & are expensive.

Apart from financial security to both the project owner and contractor in case things go south, surety bonds provide a myriad of other benefits. Let us take up all these benefits one by one.

Financial Protection : Primary Benefit

As a primary objective, Performance bond for construction industry protects the project owner as well as the contractor from financial loss. If the contractor fails to fulfill the terms of their contract such as failing to complete the project on time, failing to pay subcontractors or suppliers, or using subpar materials, the project owner stands protected.

If the contractor is unable to complete the project due to circumstances beyond its control, Such as an act of nature or the fault of the project owner. The bond protects the contractor.

How Performance bond in construction industry would take you ahead of competition ?

The construction sector has long been plagued with the issues of liquidity. It is an industry with with massive investments and high gestation periods. While the return on investment is good, the short term cash flow is generally a problem for contractors. Performance bond solve many such problems for the contractors.

Provide increased liquidity by freeing working capital

Unlike Bank Guarantees surety bonds do not require collateral.

This frees up working capital for the contractors & increases liquidity. The freed up capital can be used in more important aspects of the project , which is beneficial for all the parties involved in the project.

Line of Credit is unblocked

Surety bonds are based on the financial solvency of a company. They do not diminish the company’s borrowing capacity as they are issued by an insurance company. This is not true for a bank guarantee which diminishes the company’s line of credit. The surety bond is based on the strength of your business, not your credit score.

Performance bond in Construction industry is cheaper

Surety Bonds are charged for the time period for which the Bond is being utilized in contrast to Bank Guarantees. As told earlier it also frees up the working capital as collateral is not required.

Thus, Performance bond for construction industry will reduce direct & indirect costs for contractors.

Surety bond : panacea to all your construction project woes

Overall, Performance bond construction industry provide a range of benefits for both project owners and contractors. By providing these benefits, surety bonds can help to ensure that construction projects are completed on time and to the highest possible quality.

Read more benefits of Surety bond Insurance w.r.t Bank Guarantee here