Sourcing guarantees through a local bank can become a costly endeavour since banks generally ask for 100% collateral on the bond required. In other words, a guarantee of R1 000 000 would generally require you to put up surety of the same value by ceding over your bank overdraft, investment accounts or even property.
Securing a guarantee facility with lower collateral rates – 0% to 10% of guarantee value – through the insurer market will significantly reduce the initial cost outlay at the start of the project.
Here are some of the things you will need to consider …
This in turn will give you more freedom with your cash flow and can also allow you to bid on larger construction projects because the costs of the guarantee can be determined beforehand.