How Performance Bonds works.
As a commodities buyer/seller or an exporter competing for overseas contracts, including simultaneous buy/sell transactions, you’ll often be required by a buyer/seller to provide a performance bond. A performance bond gives your buyer/seller assurance that if you don’t perform your obligations under the export contract or buy/sell contract, they can call on the bond to reduce their losses.
“As a result, the ability to offer a buyer and/or a seller a performance bond, means you can compete more effectively in the global market. ”
However, the value of a bond that your buyer and/or seller requires may be a significant percentage of the contract value. To issue the bond, your buyer and/or seller may require security for its full amount, tying up too much of your working capital and preventing you from pursuing other opportunities.
If you can’t provide the full amount of security the buyer and/or seller requires, A3 INSURANCE BROKER (S) PTE. LTD may be able to assist. If you meet our eligibility criteria, we can issue the bond to your buyer and/or seller directly, or in conjunction with your bank.
Our security requirements are based on an individual assessment of your ability to perform the export or buy/sell contract and our credit risk assessment, and the value of the security we require may be less than the amount of the bond. This enables you to meet your export or buy/sell contract requirements without tying up all your working capital.
