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Decades of Surety Bonding expertise delivers the best pricing for our clients on all types of Surety Bonds...
To learn more call 800.686.8080, or
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The Advantages of Surety Bonds
Advantages of Surety Bonding vs. Letters of Credit
Bonds have many advantages over ILOCs (letters of credit), including:
- Surety bonds are cost effective. Letters of credit create a contingent or balance sheet liability and reduce a company's borrowing capacity with their bank.
- A letter of credit will utilize a portion of the legal limit a bank may lend to your business.
- Banks will almost always require specific assets be pledged to secure the ILOC.
- Handling of disputed claims. There also are differences in how banks and surety bonding companies approach the situation in the case of a claim or dispute:
- Banks: A "standby" Letter of Credit can be called by the state or federal agency upon demand - no questions asked. When this happens the bank pays the agency the amount of the letter of credit. Your business is placed in the position of being considered "guilty until proven innocent."
- Surety Bonding Companies: When you utilize surety bonds, the issuing insurance surety bonding companies have a duty and responsibility to resolve any disputes in an equitable manner, protecting the rights of your business - "innocent until proven guilty."
Advantages of Surety Bonds vs. Other Instruments
Advantages that Surety Bonds have over other forms of financial assurances include:
- Bonds do not present a significant drain on cash reserves
- Bonds do not encumber balance sheets and are not reportable per se
- Bonds allow for rate adjustments as the collateral fund grows
- Bonds avoid over-funding through the use of trust funds
- Bonds allow for maximum efficiency of capital and resources, avoiding double funding
Brunswick Companies is a national provider of surety bonding, licensed in every U.S. state. Contact us to learn more about how we can help provide for your company's surety support needs.
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