FINANCIAL GUARANTY BONDS USED AS CREDIT
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
This bond would act as credit enhancement against default
of interest or principal due on a loan or to secure bank
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.
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 $
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