When working in a construction company, keeping track of your projects are a crucial part of your business. This is because slight mistakes can have a huge impact on your business, especially if it might involve legal proceedings, very expensive, right?
Keeping track of your projects, on the other hand, can not only be protective but also fulfilling at the same time. With the help of a performance bond, you can ensure that you manage to raise the expenses required, ensuring you get the job done in the easiest, effortless and timely fashion.
When using performance bonds, construction companies are able to deliver what they previously could not as they get access to more funds, thus more recourses.
What Performance Bonds are all about
Performance bonds, used to keep track of a won tender, basically promises a company seeking construction that, in case the contractor or construction company fails to complete its project, compensation would be made to the extending unto which the initial investment had been made. This is to compensate the owner, the company seeking contractors for its projects.
Protecting the buyer of the project makes the tendering process less expensive, smooth, and easy to handle leave alone risky.
In Kenya, performance bonds, though still used in the same way, they are mostly used to secure funding by a contractor or a construction company form either a bank or another financial intuition in order to finance its construction tender. This is very ideal as it bars need for the compensation required to the owner in the first place.
Performance bonds have been on the rise in Africa, as most Small and medium-sized businesses, SMEs, have found it to be an efficient, easy and reliable source of finances, to fund their business as well as being profitable with low-interest rates.
How You Can Benefit Most Out Of Performance Bonds
To get the most out of a performance bond, you need to ensure you get partners who understand your needs well as well as a strong partner who can help you in times of need. This means they have to be efficient, fast and reliable.
Getting the right partners helps as opportunities identified will not go to waste, thus tapped into.
Another great way of maximizing performance bonds is by looking for tendering opportunities. As performance bonds promise to deliver more cash to your business without much of a hustle, it is now up to you to look for opportunities that you can tap in to, and get the best out of.
This calls for even higher tender opportunities that you can currently not manage, as a performance bond will enable you to undertake them.
This, in the long run, will be profitable, and better than waiting for tenders you can finance yourself.
Although performance bonds might sound so good, no drug has no side effect, the doctor will say. Caution needs to be taken, as a business who solely depend on performance bonds might as well not have it well.
Some of the major challenges it can bring to your business are high-interest rates leading to lesser profit margins. This is especially heavy for businesses who do not pay off their debts in time. To ensure you do not suffer bad credit, ensure you calculate all possible outcomes, in terms of profit margins, compared to the interest in the loan and expenses and do your math well.
Another challenge is declination. It is most probable that you can easily secure a performance bond, even more, certain than opening a bank account, yet if such is not given your business could have it bad.
This means your business needs to ensure you have both plan ‘b’ and ‘c’ just in case things do not go as expected. In this case, tenders need to be planned and their outcomes calculated to avoid bad risks that can cripple your business.
At momentum credit, we provide performance bonds without requiring you to open any accounts, we do not require any physical assets, to act as collateral, for example, land or title deed and only keep up to 30% cash cover in a safe trust account. This is done in less than 24 Hours.
This is in contrast to banks and other financial institutions that may require you to fill lots of paperwork, and have to wait for long just to get a no response.
This is why we exist to expand your potential.