FINANCIAL GUARANTY BONDS USED AS CREDIT ENHANCEMENTS

 

 

Financial Guaranty Bond, also know as SURETY BONDS are contracts between three parties : the principal - the one obligated to make a payment, the secured party and the insurer (Surety).
Under the contract the surety agrees to make good any default on the part of the principal in meeting the financial obligations toward the secured party, the one whom payment is to be made.

These bonds are used by business enterprises intending to borrow funds or issue a promissory note to buy a business or to enter into any financial obligation requiring a guaranty.

This bond would act as credit enhancement against default of interest or principal due on a loan or to secure bank debt.
The insurance underwriters review the proposed plan and other relevant information to determinate whether they will issue a surety.
A commitment to issue a Financial Guaranty Bond may be furnished within ten days after the underwriter has all the required information and reviews the request.

Fees are based on an annualized charge and may be issued for a term of ninety days to five years.
The single premium for the surety is between five ten percent of the amount at risk by the insurer.
The amount of the Financial Guaranty Bond may be from $ 10.000.00 to $ 20.000.000.00.

 

 

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