Performance Bond

Performance Bond or Performance Guarantee or Surety Bond is a financial tool issued by a bank on its clients' behalf to assure their performance. Further, this acts as a guarantee; to secure any claim by the buyer to the seller; in case of any default in the supply of goods; as agreed in the contract.

Performance Guarantee also often used in construction projects. Here, the contractor provides this bond in favor of the project owner to assure their work on the project. Also, this protects the developer against any claim; in case of non performance by the contractor, as per their agreed terms. Also, this bond assures that even in case of any default; - such as bankruptcy or any events, the work will not be stopped or affected.

At the same time, this is also issued by the seller, in favor of a buyer while concluding large contracts of goods supply. Also, this issued MT760 will act as a guarantee to obtain the Letter of Credit - DLC MT700 from the buyer to conclude the deal.

Getting such bonds from traditional banks can be tough. As the process is slow and also requires the tie up of working capital. We understand these problems; Also, we're ready to provide you the right solution. Further, being performance bond providers, we provide these bonds from our rated bank accounts. So, there is no need to tie up your cash funds; also, no need for blocking your capital / funds to avail MT760.

Parties Involved in Performance Guarantee

There 3 parties involved with PG MT760 and they are:-

• Principal - Contractor or supplier, the one who performs the job.
• Obligee - The project owner or buyer, the one who receives the guarantee. And the one who hires the contractor / seller to complete the job.
• Bank- Who issues the guarantee; and assures that the contractor or seller will perform as per the contract terms.

Performance Bond Claim

For instance, if any default occurs, then the developer / buyer can claim the bond to get proper compensation. To file a claim under the issued bond, there are a few things that must be noted:-

• The project owner / buyer must openly declare the contractor /seller's default; under the terms.
• There must be a valid reason to declare the contractor / seller's default.
• Also, the developer / buyer needs to meet all the terms; as per the contract.

Options Available to Claim a Performance Guarantee

• The bank or the bond issuer can discuss with the project owner / buyer to find out the issue that created the default. And also, thereby convince them to revoke the statement of default; and continue working on the same project.
• Another option, the bond issuer can enter into a formal contract with the project owner / buyer. Via this, the contractor / seller can ensure that; they will complete the job as per the signed contract.
• Finally, as the contractor is in default; and unable to perform as per the signed contract. Then, the bank arranges a new contractor; to carry out the pending work. Also, the new contractor needs to pay the amount needed to finish the work. However, the bank did not compel to pay more than the liable limit written on the bond.

Performance Bond Cost

The performance bond cost may vary based on the tenure of the required bond. Usually, it mainly includes commission fees and other handling fees. Further, these charges should be borne by the applicant; and it should be paid to the issuing bank.

Disclaimer:

Keonie Global Traders helps Local and International firms access business finance, working directly with businesses and their trusted advisors. We are a brokerage firm and do not provide loans ourselves. All finance and quotes are subject to status. Guarantees and Indemnities may be required. Keonie Global Traders can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Keonie Global Traders may receive a commission or finder’s fee for effecting such introductions.