Surety - Corporate & Commercial
WTW is one of the largest surety brokers in Pacific. Our practice, formed in 2004, has a team of specialists with over 70 years of combined business experience across the banking, finance, underwriting and broking sectors.
We are a recognised leader across the industrial and service industries that includes:
- Catering
- Cleaning
- Supply chain
- Facilities management
- Services management
- Mining and associate services
- Manufacturers
- Information Technology
- Communications
- Construction
What are surety bonds?
Surety bonds are a viable alternative to bank guarantees and cash retentions, as well as an effective way of increasing a contractor’s capital base.
Unlike bank guarantees, which are supported by collateral and tie up valuable working capital or other assets, surety bonds do the opposite, they free up capital. Surety providers evaluate the performance risk of the contractor and its ability to complete contracts.
As with bank guarantees, surety bonds can be unconditional, irrevocable, payable on demand or conditional, aligned to conditions precedent being met prior to a payment under the bond.
Who is eligible for a surety bond?
Candidates will generally need to demonstrate the following to be considered eligible for an annual surety bond facility:
- A minimum turnover of $20 million
- A solid trading record – at least three years of continuous profitability
Bonds and contract types
The following are typical bond types issued under contract:
- Bid/tender bonds
- Performance bonds
- Maintenance bonds
- Retention bonds
- Off-site bonds
- Advance payment bonds
- Mining rehabilitation/reclamation bonds
- Retro bonds
- Lease bonds
- Workcover bonds
Surety bonds can be used for a broad range of contract types including residential, commercial, industrial, civil, engineering, mining and infrastructure. Bonds are an accepted form of contract security for most principals, including local, state and federal government departments.
The advantages of bonds
Some advantages of surety bonds, compared to traditional bank guarantees and cash retentions, include:
- No tangible security or collateral required, thereby freeing up assets for other purposes, such as growth of the business or procurement of additional working capital
- Improved liquidity
- Enhanced working capital by eliminating the need to use established credit lines for contingent liability purposes
- Only pay for the bond limits used, not the whole facility
- Contractors may have their bids regarded more favourably by principals since their financial status has been assessed by an independent third party (a major surety provider) who is willing to provide the principal a written unconditional guarantee of the ability to perform the contract
- Principals can achieve an easier selection process, since contractors with surety bonds are less likely to become insolvent than those without bonds.
