Surety Bonds and Bank Letters of Credit Comparisons

By:   Jack Anderson, President This is the final post in a series of blog posts where we have been exploring surety bonds and bank letters of credit – what each is, their differences, as well as advantages and drawbacks of each. Today, we are going to discuss the advantages and drawbacks to both a surety bond and a LOC. Let's start with the advantages: Surety Bonds Since the creation of the surety bond does not go through a bank or financial institution, a surety bond can free … [Read more...]

Surety Bonds and Bank Letters of Credit Comparisons

By:  Jack Anderson, President This is the 3rd post in a series exploring surety bonds and bank letters of credit – what each is, their differences, and advantages and drawbacks to each. What is the expected cost of each instrument? For a surety bond, cost is generally 0.5% to 2% of the contract price.  A bond is project specific and covers the duration of the contract.  The cost of the bond is included in the contractor's bid price. For a bank LOC, the cost is generally 1% of the … [Read more...]

Surety Bonds and Bank Letters of Credit Comparisons

By:  Jack Anderson, President This is part 2 in a series of blog posts where we will continue to explore surety bonds and bank letters of credit – what each is, their differences, and the advantages and drawbacks with each. How is each obtained? The contractor obtains the bond through a surety bond agency or a surety bond producer such as Goldleaf Surety Services. The contractor obtains the LOC through a banking or lending institution. What is your borrowing capacity with … [Read more...]

Surety Bonds and Bank Letters of Credit Comparisons

By:   Jack Anderson, President Over the next several blog posts, we will explore surety bonds and bank letters of credit – what each is, their differences, and the advantages and drawbacks to each. Let’s start with a basic definition for each. A surety bond is a three-party agreement between the surety company, the oblige (project owner), and the principal (the contractor).  A performance bond protects the owner from non-performance and financial exposures should the contractor … [Read more...]