Advance Payment Gaurantees
When an Employer agrees to give the Contractor money upfront to pay sub-contractors to complete the project. Advance Payment Guarantees are designed to protect the sub-contractors and the Employer should the Contractor suddenly go bankrupt.
We offer affordable and flexible Advance Payment Guarantees, with solutions for all segments of the civil & construction industry – from the small bakkie-builder, right up to large, national companies.
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Get All The Benefits Of Our Advance Payment Guarantees
Tender on Bigger Projects
Unlike Bank Bonds, we don’t require 100% collateral when issuing Advance Payment Guarantees. With cash collateral requirements of only 7–15%, our Guarantee facility allows you to free up your cashflow and tender on bigger contracts.
Ensure Your Project's Success
When issuing an Advance Payment Guarantees, the Guarantor/Insurer agrees to back you and become your co-principal debtor. This means you’ll then have a third-party’s professional opinion of your ability to perform and complete the project.
Get Your Project Started Without Delay
Once your initial Guarantee facility has been approved, you can be assured of a fast and seamless process when requesting Advance Payment Guarantees on all your future projects.
Pay Less Tax
Both the Advance Payment Guarantees & Contingency Premiums are considered insurance expenses and are therefore deductible for company tax purposes.
Save For A Rainy Day
Your Collateral Funds (Contingency Premium), reserved by the Insurer, will earn investment income at current interest rates. Should your Advance Payment Guarantees be returned, expire, or your facility cancelled, your Contingency Premium will be returned to you, inclusive of interest earned. The Contingency fund also allows you to accrue reserves for unforeseen risks on a particular project, or to allow yourself additional capacity for future projects.
Save Time and Resources
There’s no need to go in search of a supplier for your other insurance needs. We offer a full range of niche, insurance products at exceptionally competitive rates.
Frequently Asked Questions
What happens if the contractor goes bankrupt?
If the Contractor defaults, or goes bankrupt and fails to honour their obligations, the Owners/Employers may call on the Advance Payment Guarantees in order to recover funds paid out in advance. The Insurer then pays the Employer the agreed-upon guarantee amount so they can find a new Contractor to complete the project. In most cases, the Insurer will hold the Contractor liable and will expect reimbursement of the amount paid.
What documents should I have prepared for the application
- Company profile (including an organogram and copies of the current and previous contracts)
- Two years’ financial statements and three months’ bank statements
- Letter of appointment
- Contract information
- Guarantee wording requirements
- Company registration documentation
- Copies of all members’ identity documents and income tax numbers
- Copy of letterhead
- Tax clearance certificates
- CIDB certificate
What will the guarantor look at when assessing my application?
All applications are subject to a thorough analysis to establish the Contractor’s risk profile. This will include an assessment of the Contractors’ financial standing and their resource capabilities to fulfill the Contract obligations.
For Corporate Clients, emphasis is placed on:
- the financial standing of the Contractor
- the company structure and shareholding
- the Contract information
- the Guarantee wording requirements
- the securities available
What Could Trigger A Claim?
Liquidation of the contractor
Liquidation of the Contractor’s business is one of the most common reasons for a Guarantee to be called up. Liquidation automatically places the Contractor in default of the contract and will thus trigger a claim for the Advance Payment Guarantee.
The Employer needs the project to be completed and will have to arrange for a replacement Contractor. This causes delays and an inevitable increase in costs.
Contractor expressly refuses to perform its obligation
The Contractor expressly refusing to perform his obligations and perform under the contract gives the Employer the right to terminate immediately and call up on the Advance Payment Guarantee.
Breach of contract by the contractor
Example:
Eskom Holdings Soc Ltd v Hitachi Power Africa (Pty) Ltd and Another (139/2013) [2013] ZASCA 101 (12 September 2013)
Eskom presented three performance guarantees for payment – a number of disputes had arisen between the parties concerning the performance by Hitachi of its obligations under the construction contract. Eskom alleged that Hitachi had been guilty of material and ongoing breaches of the construction contract. It complained that Hitachi had delayed the completion of the first operating unit at Medupi. It also claimed that in view of the said material breaches, it was entitled to demand payment under the guarantees.