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A surety bond facility gives your company a pre-approved bonding limit — similar to a revolving credit facility but without tying up cash. Here's how the process works from application to bond issuance.
A surety bond facility is a pre-approved aggregate bonding limit that allows your company to issue individual bonds within 24–48 hours, without submitting separate applications each time. Think of it as a revolving credit facility — but instead of borrowing cash, you're drawing down guarantee capacity.
How a facility is established
The process typically takes six to eight weeks from first engagement. Your broker prepares a detailed financial submission to surety underwriters, including three years of audited financial statements, details of your management team and track record, your current work-in-hand and project pipeline, existing guarantee and bonding obligations, and your growth strategy and target contract sizes.
Surety underwriters assess your performance capability — can this company deliver on the contracts it's bonding? — rather than requiring collateral. This is the fundamental difference from a bank guarantee facility.
Facility structure
A typical facility specifies an aggregate limit (total outstanding bonds at any time), a single bond limit (maximum size of any individual bond), approved bond types (performance, maintenance, retention, advance payment), and the annual premium rate, usually 1–2% of bond face value.
Facilities start from around $1–2M at the entry level and scale into the hundreds of millions for larger operators. As your financial performance improves and your track record strengthens, limits can increase at annual review.
Issuing individual bonds
Once your facility is established, issuing a bond against a new contract is straightforward. You notify your broker of the bond requirement, provide the contract details and required bond wording, and the bond is typically issued within 24–48 hours. No separate credit approval. No additional security. No impact on your bank facilities.
Ongoing management
Facilities require an annual review with updated financial statements. Unlike bank facilities, there are no line charges or non-utilisation fees — you only pay premiums on bonds actually issued. Your broker should also be actively managing bond releases as projects reach practical completion, freeing up capacity for new work.
What it costs
Annual premiums typically range from 1–2% of bond face value, depending on your financial strength, sector and facility size. There are no establishment fees, no non-utilisation fees and no hidden charges. Compared to the effective 4–5% annual cost of equivalent bank guarantees, the saving is substantial.
