An advanced payment guarantee, also known as a cash guarantee, is used when a commercial contract is issued to guarantee that payment gets made to the company that is doing the work. An advance payment guarantee also makes the promise that the payment will be returned to the buyer if the seller does not complete their contractual obligations to deliver the goods or services required.
There are 1000s of different types of advance payment assurance in existence. For example, one type of advance payment guarantee in construction uses this guarantee to ensure that the work a company is doing is done thoroughly and properly. If the work is not done completely the person who contracted that construction company will be able to get their money back for the job that was left incomplete by the construction company.
Many other industries have similar types of guarantees that are used in their industry as well. Each will vary a little bit in order to meet the exact needs of that specific industry at the time.
How Does an Advanced Payment Bond Provide Legal Security?
The advanced payment guarantee provides legal security by offering a unique kind of protection to the buyer. The advanced payment bonds provide security through guaranteeing that the contracted company will provide the goods or services that they are contracted to provide before complete payment is made. If the entity that is hired to do provide a good or service does not provide that service, the buyer has a money-back guarantee on their investment.
These advanced payment guarantees also ensure that all laws and regulations related to the product or service that the consumer has purchased are followed.
Why Bother Buying them?
They protect the new entrepreneur from thievery when they hire a new company to provide a good or service to them as they are growing their own startup company. Even established businesses should consider purchasing these guarantees to help protect their investments in goods and services that they purchase or contract others out to provide.
These guarantees ensure that your hard work and investments in your business are protected. Furthermore, guarantees ensure that you are not taken advantage of or that you are not out of money because someone gets paid but never provides you with the goods or services that were 'promised.'
What Does an Advanced Payment Guarantee Cost?
The cost of these advanced payment guarantees can vary. Some of these guarantees are able to be issued for a flat rate without a financial review while others require more in-depth reviews in order for them to be provided. Generally speaking, you can purchase a $10,000 guarantee for about $100 to $140 or a $50,000 guarantee for about $500.
On average, the rule of thumb to go by seems to be that each $10,000 of guarantee costs about $100 to purchase. This means that most advance payment bonds cost between 5 and 20% of their face value to purchase. Sometimes, the cost will be higher but that serves as a median cost or average across the industries.
Who Should Buy Advanced Payment Surety Bonds?
Entrepreneurs and business owners working in a variety of fields should consider purchasing these advanced payment guarantees for their business including (but by no means limited to) businesses or entrepreneurs working in the following fields:
- Auto dealership bonds
- Construction companies
- Collection agencies
- Durable medical equipment providers
- Health clubs
- Auctioneers
- Travel agencies
- Public notaries
These are some of the businesses and occupations where professionals benefit the most from having an advance payment bond which will help them ensure that their work and their business are thoroughly protected.
Where Can I Purchase Advance Payment Bonds?
Advance payment bonds can be purchased from NFP as we are one of the largest surety agencies for your bond needs. We would be happy to sit down and talk to you about purchasing an advance payment bond that you need for your business. These will help you rest easy knowing that your money is safe and your business is guaranteed the work that you have contracted out and are having completed.
Your time is valuable to us and we will do what we can to ensure you are able to get your advance payment bond purchased as conveniently and hassle-free as possible. Whether you need a money transmitter bond, License, and Permit bond, or others we can help you out. Contact us now, we're ready to assist you.