Banks performance bond

[newinnycus]

I was awarded a contract with the City and they request a performance bond.
My bank is willing to support me even with an ILOC (letter of Credit).
But if the City wants a performance bond I've read that performance bonds only can be issued by Insurance companies?
Is that true?

[Admin]

The city most likely has some sort of requirement for the standing of the bonding company. Many simply request that the surety be on the Federal 570 Treasury List. However, some may have additional requirements, such as a B+ rating or higher. That is something you would have to discuss with the city that is requiring the bond of you.

[bondman]

I was awarded a contract with the City and they request a performance bond.
My bank is willing to support me even with an ILOC (letter of Credit).
But if the City wants a performance bond I've read that performance bonds only can be issued by Insurance companies?
Is that true?

In the USA banks will issue Standby Letters of Credit to cover contractual performance. Surety Companies will issue actual bonds. The differences between the two are numerous but generally

A Bank would cover approx 10% of the contract value, issue an instrument that is payable against a simple demand of payment without the requirement of proof of default and require a fixed calendar expiry date to be in the Standby Letter of Credit by which time claims must have been received by them.

A Surety would cover anything upto 100% of the contract value, issue an instrument under which there is a requirement to establish proof of a default and consequently a loss. The bond will be valid until contract completion as certified under the contract rather than rely on a calendar expiry date.

Obviously there are many more differences but i hope the above helps.