In international trade, it's common for an overseas buyer to require their supplier to provide one or more bonds (also known as guarantees). As a result, the ability to provide bonds to a buyer means you can compete more effectively for contracts in the global market.
If your bank can't help you with a bond, or they require an amount of security that you can't provide, EFIC may be able to assist. A bond from EFIC can help you meet your export contract requirements without tying up all your working capital.
Bonds often requested by overseas buyers include:
At the start of an export contract, your overseas buyer may agree to make an upfront payment to you in advance of receiving delivery of your goods or services. While this provides you with cash to finance the export contract, your buyer may need assurance that their upfront payment will be returned if you don't complete the contract. An advance payment bond provides your buyer with security for their advance payment.
A performance bond gives your buyer assurance that if you don't perform your obligations under the export contract, they can call on the bond to reduce their losses.
A warranty bond protects your buyer from loss if the goods or services you've provided don't meet your contractual warranty obligations after you've completed the contract.
For Australian exporters, competing for business in the United States market can present particular challenges. In the US market, suppliers are typically required to provide a surety bond, from a registered US surety bond issuer, for up to 100% of the export contract value as security for their performance obligations.
EFIC’s US bonding line offers easy access to surety bonds. We work with Liberty Mutual Insurance Company to help you meet your US bonding requirement so that without using up your working capital, you can compete more effectively in the US market.