What are Bonds and Insurance Guarantees?
Bonds are not actually a form of insurance but are closely related. There are various kinds of bonds available (Most common types of bonds), most of which are designed to give a financial guarantee that an agreement will be fulfilled or a financial penalty paid.
Bonds are commonly taken by construction companies as a requirement of their contract or as part of their tender. Bonds are also used as guarantees by suppliers and tenants.
Bonds are available from some banks, but they generally come at the expense of your overdraft, therefore restricting cash flow and working capital, so it can be advantageous to get them from a broker. The most common kind of bond is a performance bond; for further information on performance bonds click the link for our Q&A.
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