Advantages of Surety Bonds versus Guarantees
Allows the client to not use bank credit, it increases their creditworthiness. The customer may release or reduce the consumption of credit lines, increasing the available current assets.
Do not generate any output that does not come from the premium cost. The insurance company does not charge any cancellation fee, study’s costs, opening costs, etc,… like the financial institutions.
The insurance companies are not involved as an agent or a broker trade, who charge a certain percentage based on the amount of the guarantee.
Any additional warranty or compensation is asked. The service provided by insurance companies starts and be completed in the policy issue. Banks often require assets in the customers’ checking account, or any other type of compensation, as an additional guarantee.
This insurance is prorrata temporis, makes premium rebates covered by the period, while the bank does not usually return the amount when the duration of the warranty is less than the billed period. Also, being an insurance premium would have a deductible tax treatment.