What is the difference between Bonds vs Bank Guarantees

Aug 21, 2020 | News

People often ask what is the difference between Surety Bonds vs Bank Guarantees.

The products are generally identical and have exactly the same obligations, at law when called on for payment. Under an unconditional bank guarantee, the bank’s liability to make a payment to the beneficiary arises immediately upon the beneficiary making a demand without the beneficiary having to satisfy any other condition precedent and irrespective of whether or not there has been a default by the Contractor under the underlying contract.

Exactly the same obligation, at law, applies to Surety Bonds should an unconditional bond be called on for payment. 

“Payment must be made by the Surety on Demand”

The general format of an unconditional Surety Bond follows the Australian Standards AS2124/AS4000 document. The payment must be made by the Surety upon demand, without any assessment taking place as to the amount paid.

The payment amount is the amount of the claim up to the face value of the bond in question. The only assessment that will take place is to ensure the claim is made in terms of the bond itself. This again is the identical process involved in the payment of a bank guarantee.

“Identical Wording”

The bank guarantee and the surety bond contain identical wording (generally) which states “it is unconditionally agreed that the financial institution will make the payment or payments to the Principal without reference to the Contractors and notwithstanding any notice given by the Contractor not to pay same”.

Also Bonds are widely accepted form of contract security and accepted by the private sector, federal, state and local municipalities and are flexible and operate alongside traditional banking facilities.

Most people get confused  or don’t understand the difference between Surety Bonds vs Bank Guarantees, so If you want to find out what is best option for your business give us a call.

For more information

+ 61 2 8019-7269
enquiry@steningsimpson.com.au

Our Customers Say

We are a publicly listed company and have utilised the service of Stening Simpson in excess of 10 years.  They have supported our company through some very difficult years

Sam L

Stening Simpson
2020-10-21T17:45:49+11:00

Sam L

We are a publicly listed company and have utilised the service of Stening Simpson in excess of 10 years.  They have supported our company through some very difficult years
Stening Simpson is one of the most professional groups.  They have been one of the primary reasons for our success due to them securing multiply facilities on our behalf at significantly reduced rates compared to our Bank Guarantee rate.

Frank I

Stening Simpson
2020-10-21T17:46:23+11:00

Frank I

Stening Simpson is one of the most professional groups.  They have been one of the primary reasons for our success due to them securing multiply facilities on our behalf at significantly reduced rates compared to our Bank Guarantee rate.
It has been an absolute pleasure working with Stening Simpson. We appreciate you finding us the Bond Facility through Berkshire.  We thank you for your advice, availability and timely execution of Bonds. We look forward to continue working together next year.

Zaheer G

Stening Simpson
2020-12-23T06:21:18+11:00

Zaheer G

It has been an absolute pleasure working with Stening Simpson. We appreciate you finding us the Bond Facility through Berkshire.  We thank you for your advice, availability and timely execution of Bonds. We look forward to continue working together next year.

I have known the Stening Simpson team since 1999; for over 20 years. Through our Company’s Surety Bond facilities arranged by Stening Simpson, the late Peter Stening, Elaine Simpson and David Wright have always been supportive to our Company, our Surety Bond providers’ relationships, periodic facility renewals and our many day-to-day Surety Bond requirements. The Stening Simpson team has always acted professionally, respectfully and with a high level of excellent customer service and care.

Frank I

Stening Simpson
2020-12-23T06:28:00+11:00

Frank I

I have known the Stening Simpson team since 1999; for over 20 years. Through our Company’s Surety Bond facilities arranged by Stening Simpson, the late Peter Stening, Elaine Simpson and David Wright have always been supportive to our Company, our Surety Bond providers’ relationships, periodic facility renewals and our many day-to-day Surety Bond requirements. The Stening Simpson team has always acted professionally, respectfully and with a high level of excellent customer service and care.
Stening Simpson introduced Surety Bonds into the Australian market over 30 years ago.  Their first facility was secured from overseas markets for the largest construction company at the time.  We regard Stening Simpson as one of the most professional Specialised Risk Brokers we deal with. They continue to manage the Surety Bond requirements of a number of major corporations throughout Australia

James D

Stening Simpson
2020-10-21T17:35:19+11:00

James D

Stening Simpson introduced Surety Bonds into the Australian market over 30 years ago.  Their first facility was secured from overseas markets for the largest construction company at the time.  We regard Stening Simpson as one of the most professional Specialised Risk Brokers we deal with. They continue to manage the Surety Bond requirements of a number of major corporations throughout Australia
Our business relationship commenced with Stening Simpson in 1993 at a time when our company and the Construction Industry was suffering low turnover levels and competitive margins.  Stening Simpson exhibited great skill and to a certain extent bravado in taking on our business at that time. This exemplified their understanding of the construction industry.

Stening Simpson conduct their business in a professional, courteous and business-like manner and we recommend their services.

Ravin R

Stening Simpson
2020-10-21T17:38:14+11:00

Ravin R

Our business relationship commenced with Stening Simpson in 1993 at a time when our company and the Construction Industry was suffering low turnover levels and competitive margins.  Stening Simpson exhibited great skill and to a certain extent bravado in taking on our business at that time. This exemplified their understanding of the construction industry. Stening Simpson conduct their business in a professional, courteous and business-like manner and we recommend their services.
Stening Simpson was appointed as our Specialised Risk Insurance Brokers in 1992 handling our entire worldwide insurance portfolio. Stening Simpson are the leading Surety Bond Brokers in Australasia.  They secured a substantial worldwide Surety Bond Facility for our operations which has had a positive impact on our business. We do not consider Stening Simpson as just a supplier instead they are an integral business partner that provides innovative services and a genuine commitment to the success of our company.  They have proved to be a company of exceptional integrity and extremely professional

John C

Stening Simpson
2020-10-21T17:39:05+11:00

John C

Stening Simpson was appointed as our Specialised Risk Insurance Brokers in 1992 handling our entire worldwide insurance portfolio. Stening Simpson are the leading Surety Bond Brokers in Australasia.  They secured a substantial worldwide Surety Bond Facility for our operations which has had a positive impact on our business. We do not consider Stening Simpson as just a supplier instead they are an integral business partner that provides innovative services and a genuine commitment to the success of our company.  They have proved to be a company of exceptional integrity and extremely professional
The Stening Simpson team have been valued clients of Australian Surety Corporation Pty Limited/AP Surety since our formation in 1994. We recognize them to be one of the most professional and highly reputable Specialised Risk Brokers on our books. We look forward to a long continuing working relationship with them.

Rodney R

Stening Simpson
2020-10-21T17:39:44+11:00

Rodney R

The Stening Simpson team have been valued clients of Australian Surety Corporation Pty Limited/AP Surety since our formation in 1994. We recognize them to be one of the most professional and highly reputable Specialised Risk Brokers on our books. We look forward to a long continuing working relationship with them.
We engaged Stening Simpson Group some 6 years ago. The longevity of this relationship being the product of their clear-thinking professional service.  They have always displayed an extensive and practical knowledge of their field with an eagerness to investigate and satisfy even our more obscure requirements which in the writer’s opinion is derived from the quality of staff whom Stening Simpson employ and the dedication of the Principals to obtaining the best result possible for the client. Stening Simpson could not be regarded more highly.

Scott I

Stening Simpson
2020-10-21T17:40:26+11:00

Scott I

We engaged Stening Simpson Group some 6 years ago. The longevity of this relationship being the product of their clear-thinking professional service.  They have always displayed an extensive and practical knowledge of their field with an eagerness to investigate and satisfy even our more obscure requirements which in the writer’s opinion is derived from the quality of staff whom Stening Simpson employ and the dedication of the Principals to obtaining the best result possible for the client. Stening Simpson could not be regarded more highly.
It is with great pleasure that I write to acknowledge our twenty five years association with the Stening Simpson Group.  Each year they review our insurance requirements and organise a full range of coverages for our company. This has always been done in a most competent and professional manner.  I thank all the staff of Stening Simpson whose diligent efforts on our behalf have made our association successful and enjoyable.

John L

Stening Simpson
2020-10-21T17:41:11+11:00

John L

It is with great pleasure that I write to acknowledge our twenty five years association with the Stening Simpson Group.  Each year they review our insurance requirements and organise a full range of coverages for our company. This has always been done in a most competent and professional manner.  I thank all the staff of Stening Simpson whose diligent efforts on our behalf have made our association successful and enjoyable.
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