Surety Bonds
If you enter into a contract requiring security then putting up cash or relying on your bank may not be your only options.
Traditionally for larger companies with turnover in excess of $25 million a surety bond could be a possible option to suffice your contractual requirements. It’s common in the construction space for a contractor to have to put up collateral towards the contract. This historically has either been done with cash which has it’s own inherent problems. It could also be done by relying on your bank to provide a guarantee. This would then sit on your balance sheet or certainly weigh heavily on the banks decision to lend you further money.
The advantage of a surety bond is that you could potentially eliminate both the above situations by purchasing what could simply be viewed as an insurance policy for a premium. This could keep your cash free, and your balance sheet balanced.
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General Advice Disclaimer
This information does not take into account the objectives, financial situation or needs of any person. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation or needs.
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