Retention Guarantee
Retention Guarantees Simplified. Success Guaranteed.
In the construction industry, cash flow is the lifeblood of every project. At GM Financial Services, we specialise in streamlining access to retention guarantees—a powerful financial tool that ensures contractors receive full payment without employers withholding retention money. As trusted brokers, we connect you with leading insurers to secure tailored solutions that protect your interests and keep projects moving forward.
Retention Guarantees Process
Step 1: Contract Negotiation
- Employers and contractors enter into a written agreement (JBCC, GCC, NEC, or FIDIC Contract Conditions) outlining:
- Project scope, timelines, and payment terms
- Requirements for a Retention Guarantee (also called a retention bond or construction retention guarantee)
- Defects liability period obligations
- The contract specifies that instead of withholding retention funds (typically 5-10% of payments), the employer accepts a Retention Guarantee as financial security.
Step 2: Guarantee Application
Contractors submit their application to GM Financial Services, providing:
- Completed Retention Guarantee Application Form
- Copy of the signed contract between employer and contractor
- Retention Guarantee wording (usually an annexure to the contract)
- Project timeline and cash flow forecast demonstrating how retained funds will be managed
- Details of defect liability obligations and rectification plans
- Updated financial statements (if not already on file)
Step 3: Financial Assessment
Our insurer partners conduct a thorough evaluation, including:
- Contractor credit risk analysis
- Review of financial stability and track record
- Assessment of project feasibility and risk exposure
- Verification of compliance with industry standards
Step 4: Guarantee Structuring & Approval
Our insurer partners:
- Finalise guarantee terms aligned with the contract requirements
- Calculate risk-adjusted pricing
- Prepare a draft guarantee for employer/contractor approval
- Issue the finalised retention guarantee upon agreement
How to obtain a Retention Guarantees
Obtaining a retention guarantee requires contractors to meet specific qualification criteria that demonstrate their reliability and financial stability. To qualify, contractors typically need to showcase proven experience in completing similar projects, ensuring they have the necessary expertise to deliver quality work. A strong financial standing and sufficient liquidity are also essential, as they indicate the contractor’s ability to manage project costs effectively.
Clear project documentation and well-defined timelines are crucial for securing a retention guarantee. These details provide transparency and assurance that the project will be executed according to plan. Lastly, contractors must comply with all relevant construction industry regulations, ensuring adherence to legal and professional standards. By meeting these requirements, contractors can enhance their credibility and secure the necessary financial backing for their projects.
Documentation Checklist
Prepare the following:
- Signed contract with retention guarantee clause
- Retention Guarantee wording (annexure)
- Project completion schedule and cash flow forecast
- Defect liability management plan
- Latest audited financial statements
- Management accounts (if applicable)
- Creditors/debtors aging reports (if required)
Why Partner with GM Financial Services?
Why Partner with GM Financial Services? At GM Financial Services, we specialise in expert brokerage services, leveraging our strategic partnerships with leading insurers to deliver tailored financial solutions. As brokers, we ensure a seamless process with draft guarantees processed within 48 hours, competitive pricing with risk-adjusted terms, and complete transparency—offering zero brokerage fees with no hidden costs or annual commitments.
Partnering with us provides significant advantages for contractors. By securing a retention guarantee, contractors can preserve cash flow, avoiding the need to have 5-10% of project funds tied up as withheld retention. Additionally, our guarantees enhance credibility, demonstrating financial reliability to employers while ensuring effortless compliance with construction contract requirements.
Employers also benefit from our guarantees, gaining financial security by ensuring defects are rectified without the hassle of chasing withheld funds. Our solutions mitigate risk through guarantees backed by accredited insurers, while also simplifying administrative processes by replacing complex retention management with a single, reliable guarantee. Partner with GM Financial Services for a smarter, more efficient approach to construction finance.
Contact us today to discuss your Retention Guarantee requirements and take the first step towards a secure construction project.
What is a Retention Guarantee?
A Retention Guarantee is a financial instrument designed to replace the traditional practice of withholding retention money in construction projects. Instead of retaining a portion of the contractor’s payment, this guarantee ensures that contractors receive full payment upfront, improving cash flow and financial stability.
At the same time, employers remain protected against defects during the liability period, ensuring that any necessary corrections or repairs are addressed. The guarantee also ensures compliance with construction contract terms, providing a secure and efficient solution for both contractors and employers. By eliminating withheld funds, a retention guarantee streamlines project finances while maintaining essential safeguards.
Key Characteristics of Retention Guarantees
Retention Guarantees offer a structured financial solution that benefits both contractors and employers. These guarantees typically cover 5-10% of the contract value, replacing withheld retention funds while ensuring project security.
The duration of a retention guarantee aligns with the defects liability period, which is often between 12 and 24 months. As the contractor fulfils defect obligations, the guaranteed amount gradually reduces, reflecting the completion of necessary corrective work.
Widely recognised in the construction industry, retention guarantees are accepted under major contract frameworks such as JBCC, FIDIC, and others. This industry-standard approach provides financial flexibility for contractors while maintaining essential protections for employers.
Why Retention Guarantees Matter
For Contractors
- Cash Flow Freedom: Access working capital for materials, labor, and equipment.
- Project Continuity: Avoid delays caused by withheld funds.
- Competitive Edge: Bid confidently on projects requiring retention guarantees.
For Employers
- Assured Performance: Financial recourse if defects arise.
- Simplified Processes: Eliminate retention fund tracking and disputes.
- Trust-Building: Strengthen contractor relationships with fair payment terms.
Potential Challenges & Solutions
Contractor Risks
- Defect Liability: Failure to rectify issues could trigger the guarantee.
- Compliance Costs: Insurer fees for guarantee issuance.
Mitigation Strategies
- Proactive Communication: Regular updates to employers during the liability period.
- Robust Project Management: Ensure defect-free handover.
- Financial Planning: Factor guarantee costs into project budgets.
Why Choose GM Financial Services?
At GM Financial Services, we pride ourselves on brokerage excellence, offering clients access to a network of top-rated guarantee providers. Our tailored solutions ensure that each guarantee is structured to meet the unique needs of your project, providing financial security and flexibility. From application to guarantee release, our team provides end-to-end support, making the process seamless and efficient.
Our client-centric approach sets us apart. With dedicated account managers, we offer personalised guidance at every step, ensuring you have a trusted partner throughout the process. Transparency is at the core of our service, with clear communication and no hidden surprises. Backed by over 15 years of industry expertise in construction guarantees, GM Financial Services delivers the knowledge and reliability you need to secure your projects with confidence.
GM Financial Services: Your Partner in Construction Finance Solutions
Don’t let withheld retention funds stall your progress. GM Financial Services bridges the gap between contractors and insurers to secure Retention Guarantees efficiently and affordably.
Let us help you turn retention challenges into opportunities. Secure your cash flow, protect your projects, and build trust with employers—all through a seamless Retention Guarantee process.