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What other alternatives can we use other than bonding that will satisfy a bank

We were working on getting approvals to get a contract signed then the bank all of a sudden out of no where want a bond. In today's environment it's almost impossible to get a bond we have tried but no luck. We need alternative to what a bank will accept

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Dec 3, 2022

As a general proposition, a letter of credit can serve as one alternative to a payment bond subject to the performance & payment details as well as approvals by the parties involved. There might be other alternatives to present depending on the specific details of the transaction and the parties involved. Please connect with me if you wish to discuss the details of your specific situation.

Steve Schinker/Essential Counsel, LLC/303-319-2924/steve@essentialcounsel.com

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Dec 5, 2022

While this is frustrating especially since it seems like it came up or was explained to you late, it is a protection for the bank but ultimately for you so that a contractor actually does the work it says it is going to do for the money it has quoted. You an change lending institutions, or see if your current bank would work with an independent outside company who will provide construction monitoring services and when your contractor is requesting a payment application, the construction monitoring service would do an on-site assessment of the progress, take photos and prepare a report to show that the construction was adequately progressed to the percentage complete the contractor is requesting and approve the funding for the payment application. Many banks require this type of outside monitoring on commercial construction projects. They may already have someone in place. It could increase the “financing” costs, but could be a good work around in lieu of requiring bonds from your contractor. There is also the option of changing contractors, as there are also many contractors who will provide bonding, and they are generally more financially sound and have the resources to adequately perform on your contract. Generally, they also charge more than contractors who will not or cannot meet the bonding requirements.

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