Construction companies’ usually acquire bid bonds in order to secure tenders. This not only protects companies from incurring extra costs when it comes to tendering but has even become a statuary standard required in the tendering process by law.
In this case, construction companies are forced to seek for bid bonds. This might pose a big challenge as a bond might need to be found in the least time possible to ensure competitiveness and with the least amount of investment.
This is because tendering requires reliability, efficiency, and partners who are able to adjust to the current trends in the market. Getting partners who allow you to possess such qualities can be a deal breaker as you do not need to suffer more expenses or end up in frustration. Bid bonds required in tenders need not be time-consuming and hard to obtain, as this makes your business less efficient.
How Bid Bonds Work
To ensure that a tender is not to be awarded twice, a construction company offers to compensate an amount that will enable a company to engage the second lowest bidder for the project initially advertised and awarded to them. This limits the number of companies that decline tenders after being awarded making tendering an easy process.
A construction company, in this case, contacts a Bank, or any other financial institution to stand on its behalf and cover the cost, in case it has to pull out in any circumstances after being awarded the tender.
Such circumstances may be the construction company filing for bankruptcy, lacking the ability to engage the construction on the required and agreed terms or simply on an agreement by its management.
Bid bonds and Performance Bonds
While a bid bond is used to secure a tender, a performance bond, on the other hand, is to keep track of your construction project. Here in case, you do not manage to finish the project, the company in question is promised at least compensation for the expenses incurred.
Performance bonds are not a substitute to bid bonds, however, but a complimentary service used once you secure the tender.
To learn more about performance bonds, visit our Bid Bonds products page to find out more.
Benefits of Bid Bonds
It is evident that bid bonds have unmatched benefits. Apart from the regulatory requirement, bid bods create a business environment with confidence and understanding, enabling business transitions to occur seamlessly and effortlessly.
Bid bonds also enable construction companies to thrive, this is by providing a method of funding, instead of having to part with their assets, or part of their working capital, to cater for the fee required when bidding. This is in turn covered by a third party.
Another great benefit of bid bonds is the reduction of legal processes in the corporate world, imagine failing to supply construction services in a tender once awarded, and having to defend your case in court. Very difficult, right? This, in the long run, may end up being costly, take a lot of time and recourses, and work negatively towards your growing business.
Why Chose Us?
While banks always involve a lot of paperwork, take much time and are unpredictable all the same, Momentum Credit promises a timely and effective approach.
With a turn-around time of only less than 1 hour, we provide Bid bonds at no deposit and account opening requirements. This can save your assets to more important needs, especially if you are small or a Medium sized business SME.
What will you need to get started?
To secure a bid bond from Momentum Credit, you only need to have:
- An Application Letter, (dated and signed)
- A Copy of Certificate of Business Registration/ Certificate of Incorporation
- A Copy of your Company’s PIN
- Copy of Directors’ National Identity cards IDs
- Copy of Director’s PIN Certificate
To Sum It Up
Although it may sound insignificant, bid bonds are very vital when bidding for tenders in construction. This is because, apart from being beneficial, it is now a requirement by law.
This makes it a fundamental, that every construction company should know, and know how to work with well. At momentum credit, we not only offer a solution, but also a lasting one that will enable your business to grow.
This is from our trustworthy, reliable and timely work, resulting in you becoming more efficient and better at serving your customers as a whole.