Working Capital

[apprentice35]

I was told that surety bonds might be a way to obtain financing for working capital for a company is this true? We currently hold a broker bond through you and would prefer to stay with you if that was the case.

[Admin]

Surety bonds can not produce capital, but they can help you retain your capital...

For instance, if you are allowed to either post a bond or a letter of credit then a bond would help you to retain your current capital since a letter of credit requires 100% collateral.

Using a surety bond to raise funds is not a possibility, as they are not that type of bond.

[apprentice35]

So, what you are saying is if the job I am working on has a letter of credit in place at this point I may be able to use a Surety Bond to satisfy the requirements of the obligee? Do you think since the job is about half way I could get a bond mid-contract if the obligee would allow this?

[Admin]

Correct, that would be a case where you could free up capital. However, your problem will more likely be with the bonding company agreeing to write the bond rather than the obligee accepting it.


Any surety reviewing the bond request will require:

1. You qualify using their underwriting guidelines
2. A detailed letter from the obligee stating all work done to date is satisfactory and there are no claims in the foreseeable future.