Retention Money Guarantee
During the period of any contract, some employers can withhold between 5% to 10% of the value of every payment made to the contractor. This is known as retention money and is used to cover any remedial work. A retention money guarantee frees up this retention money and stands in lieu of the retention money instead of the employer withholding the aforementioned percentage. This will help improve a contractor’s cash flow for the duration of the project and assist in achieving profit in cash before the maintenance period is over.
Why choose Blenheim for your construction guarantees?
- Specific expertise in raising retention money guarantees from leading insurers which are approved by all employers in South Africa.
- FREE Professional Advice for all your construction guarantee queries by an experienced and knowledgeable team.
- FREE Letter of Intents to ensure you are always one step ahead in your tender applications.
- All draft and original guarantees issued within 24 – 48 hours*
- Immediate Guarantee Exposure reports generated via our tailored made software for your convenience.
- Dedicated account manager assigned to you, to ensure a personalised service.
- Timely and hassle-free collateral reimbursements.
- No annual fees.
*Subject to all information being received.
A quote takes between 24 – 48 hours to finalise, subject to all information being received.
It depends on the strength of your financial statements. Premium can be between 1 to 3.5% ex vat paid upfront, pro-rata, per annum. The minimum invoice period is for 6 months.
Here is an example and is for illustration purposes only. Let’s assume you require a retention money guarantee of R650,000 for 6 months. We will further assume that you qualify for 2% ex vat premium. The estimated premium cost would be R650,000*2%/12*6 = R6,500 paid upfront and once-off.
It depends on the strength of your financial statements. Collateral can be anywhere between 0 – 10% of the guarantee value. The average in the market is 10%. On successful cancellation of the guarantee your collateral will be reimbursed with any interest accrued.
Blenheim has specific expertise in raising insurance-backed guarantees from leading insurers. The insurers with whom we deal are reputable and accredited with all employers in South Africa including all municipalities, ESKOM Ltd, Transnet SOC Ltd and blue-chip listed entities.
A quotation usually takes 24 – 48 hours to finalise, subject to all information being received and, with all the correct documentation completed and information submitted, the facility can be put in place within four to seven working days.
With the facility in place, a guarantee is issued within 24 to 48 hours. Your facility can then be used for all your future guarantees up to a prescribed facility limit and multiple guarantees can be issued.
Remember we can still issue a letter of intent and draft guarantee during the setup of your guarantee facility. Provided sufficient documentation has been received.
Banks normally take 100% collateral and still charge fees to have a guarantee facility in place. Our insurers offer lower collateral requirements and you pay only for the guarantees you require. There are no annual fees for having a facility in place via Blenheim.
A guarantee facility separate from the bank will enable your company to grow since your financing can be handled by the bank and we do your guarantees.
The requirement for the retention money guarantee is dependent on the agreement or contract entered into between the contractor and employer.
The retention guarantee is usually put in place in one of three ways:
- At the start of the contract and retention is waived for each payment certificate.
- At Practical Completion and the certificate is to be provided.
- At Final Completion and the certificate is to be provided.