GM Financial Services

  • 011 763 1556
Facebook-f Linkedin
Menu
Instagram Facebook-f Twitter

Performance Guarantees

Securing reliable partnerships and minimising project risk is essential in the construction industry. GM Financial Services provides expertly crafted Performance Guarantees to protect contractors and clients. A performance guarantee, or surety bond, assures project completion by covering the financial risk if a contractor is unable to fulfill contractual obligations.

What is a Performance Guarantee?

A Performance Guarantee is a financial instrument designed to ensure that a contractor fulfills their contractual obligations as stipulated in a construction contract. Some key takeaways of a performance guarantee are:

  1. Purpose: The primary purpose of a performance guarantee is to protect an employer from financial loss if a contractor fails to complete the project as agreed, including non-compliance with quality standards, timelines and other contractual terms.

  2. Legal Framework: Performance guarantees governed by South African law are governed by principles of contract law, and their validity is often outlined in the General Conditions of Contract (GCC), Joint Building Contract Committee (JBCC), New Engineering Contracts (NEC), International Federation of Consulting Engineers (FIDC) used in construction projects.

  3. Contractual Requirements: Typically, employers require performance guarantees as part of the contract terms. The amount is often set as a percentage of the contract value, commonly between 5% to 10%, and must be provided before the constructor starts to work on the project.

  4. Duration: Performance Guarantees usually remain in effect until the project is completed and accepted by the Employer, which may include a defects liability period during which the contractor is responsible for correcting any contractual issues that arise.

How a Performance Guarantee Benefits You

By providing a performance guarantee, there is no need for the Employer to deduct 10% of each payment certificate, hence assisting the contractor with better cashflow during the duration of the project.

Offering a performance guarantee from an accredited guarantor can enhance the contractor’s reputation and credibility. It demonstrates confidence as an accredited insurer is willing to stand good for the performance of a contractor’s contractual obligations.

By providing a performance guarantee, contractors can build trust with employers as the performance of the contractors is backed by an accreditor third party, which is the guarantor. This can lead to long-term relationships and potential future projects, as the Employer appreciates the additional security an accredited guarantor provides.

Financial institutions may view contractors with performance guarantees from accredited insurers more favourable, potentially leading to easier access to financing for projects.

While the contractor still assumes some liability, the performance guarantee allows the transfer of immediate financial risk up to the guarantee value to the insurer, protecting employers from losses due to contractor default.

Offering a guarantee from an accredited guarantor can set contractors apart in a crowded market, positioning them as a trustworthy option for employers.

Provides funds to cover project completion costs due to a contractor’s default if necessary.

Our Process for Securing a Performance Guarantee

Establishing terms between the Employer and Contractor, including project scope, pricing, and timeline.

Before an application for a performance guarantee can be done, a guarantee facility must be established:

Requirements

  • DOWNLOAD THE GUARANTEE APPLICATION FORM

  • Complete the Guarantee Facility Application.  

  • When completed, please email the completed guarantee facility application together with the following information to info@gmfs.co.za.

    • Company Profile.

    • The latest two years signed financial statements.

    • Most recent Management Accounts. (i.e., from the date of the last financial statement to the current date but not older than three months from the current date.)

    • Latest Creditors and Debtors ageing.

    • Company shareholding organogram.

Please note that the submission of the guarantee facility and the performance guarantee application can be done concurrently to save time

Requirements

  • Completed Performance guarantee application. Below is the link to download the form.

  • When completed, please email the completed performance guarantee application together with the following information to info@gmfs.co.za.

    • Letter of appointment/contract award letter.

    • Guarantee format as detailed in the tender contract conditions.

Performance Guarantee Download

Insurers set the terms for the guarantee facility/performance guarantee amount and pricing, and if accepted, they provide a guarantee draft for the Employer’s approval.

Once the guarantee draft has been approved and all the terms of the facility conditions have been met, the guarantee is issued.

Why Choose GM Financial Services?

Over two decades in construction finance.

We have custom-made software designed to enhance workflow monitoring of all guarantee facilities, exposures, premiums paid, expired conditions and dates, giving us the ability to fact-track processes and have all relevant information at our fingertips.

Access to competitive pricing and tailored options.

Trusted by South African construction companies.

Quick turnarounds and dedicated support.

Ready to secure your project? GM Financial Services is here to help. Contact us today for a consultation, or download the Guarantee Facility Application and or performance Guarantee Application form to get started.

Need more information or a personalised quote? Complete the form, and our team will get back to you promptly.

Performance Guarantees Thank you
Scroll to Top