What is a surety guarantee?
The surety is the guarantee of the debts of one party by another. A surety is an organization or person that assumes the responsibility of paying the debt in case the debtor policy defaults or is unable to make the payments. The party that guarantees the debt is referred to as the surety, or as the guarantor.
How do you get a surety guarantee?
When companies need a guarantee, they often turn to their bank. And whilst this may seem to be the simplest approach, decision-makers should understand the other options available to them—mainly purchasing surety from an insurance company. One key reason? To free up liquidity.
When companies obtain a guarantee from an insurance company, they don’t use up any of the limits under their bank lines, giving them additional credit to use in other ways to support their business. Often, insurance companies have better credit ratings than banks, a key factor when getting clients to accept guarantees. Two examples of guarantees that can free up cash include pension bonds and payment services regulation bonds.
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