Advance Payment Bond

Defining the Bond

This bond is needed where a substantial down payment has been made to a supplier of goods or services prior to the work been carried out. In a lot of cases, it is used where a subcontractor needs advanced payment to purchase goods or services and the Contractor/Employer needs to secure the outlay in case the subcontractor defaults. They are usually On-Demand wordings(link to On-demand v Conditional)

How it works

In the construction industry, a contractor is awarded a job which requires specialised machinery or expert consultancy. The contractor requests from the Employer an advance payment which the employer agrees to. The Employer in order to be satisfied requests the subcontractor to provide them with an advance payment bond in the unlikely case that they fail to discharge their contractual duties.

Sureties do not affect a companies free cash flow and will also investigate and have the bond wording expertise to advise clients on all areas regarding any bond scenario. By not adversely affecting the subcontractors’ free cash flow and while still having the reassurance that the job will get done, an advance payment bond can greatly improve the subcontractors’ ability to meet their obligations while protecting the outlaid capital for the employer.

What we need to get started

  • Completed Advance Application Bond Proposal Form.
  • Last two years consolidated audited accounts
  • Up-to-date management accounts
  • Copy of Bond Wording