Advance Payment Bond Agreement

If you are a GC or project owner and are asked for a down payment, it is to your advantage to apply for a prepayment obligation. This is especially true when the down payment applies to a large amount of money or if the product is not on site for a period of time. The advance bond is the guarantee issued on instruction to the contractor in favour of the employer for an amount equal to the down payment received – usually between 5 and 10% of the contractual value (although it can reach an amount between 10 and 20% for technology or power generation facilities). This is just one of the different obligations used in international construction contracts. Unlike traditional construction bonds, pre-accountable bonds are ”on demand” as opposed to ”conditional” or ”default” obligations. This means that when a claim is filed against one of these obligations, the right to guarantee must be immediately paid to the obligated, no questions have been asked. These obligations differ from most secure bonds in that they are ”on demand” bonds and not ”conditional” (or ”defects”). Through a conditional loan, the company that issued the loan (the guarantee) will review all of the subject`s claims against the loan and make the payment if the claim is deemed valid. In other words, the guarantee must establish that the client is in breach of contract before paying the debt. These obligations are used for both private and public projects when the general contractor, subcontractor or supplier requests a down payment. for each interim payment, the employer deducts an amount of 10% (and, therefore, presents each interim payment of 90% not 100); In the case of traditional bonds, the guarantee is only paid in the event of a breach of contract. On the basis of this condition, the guarantee first examines the claim and determines whether the client breached the contract before the payment was signed.

By asserting one of these obligations, the owner can recover the entire down payment. Unlike other types of loans used in the construction sector, the guarantee company pays back if the owner asks for the down payment. After receiving the legal documents and the premium, we will start the loan. Bonds in advance require a thorough review of the annual accounts and the client`s holdings. Since the most common cause of the failure of these bonds is the insolvency of companies, the guarantee must ensure that they are covered and that the business is on a sound financial footing. Give us details of the transaction that is the subject of the loan requirement, including the amount and borrowing period for which it is required, as well as a more completed application form: use our convenient online system to apply for an early loan today.

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