Episode 50 Pros and cons of bank guarantees

Season #1

Today, I want to shed light on the world of bank guarantees.

They may seem like a cash flow saviour, but do they come with hidden risks? Join me as I explore the pros, cons, and the unexpected pitfalls of using bank guarantees in your trade contracts.

Whether you're a builder or a subcontractor, this episode will help you make informed decisions about your financial security.

Episode Takeaways:

  1. Bank guarantees can be tempting for improving cash flow, but they come with risks.
  2. Bank guarantees can't be adjudicated; you may have to go to court to retrieve them.
  3. If your builder withholds cash and holds a bank guarantee, you can still lose money.
  4. Using bank guarantees means you must provide them upfront, while cash retention can be withheld later.
  5. Bank guarantees for unfixed goods may expose you to more risk than you realise.
  6. Understand the insurance implications and contract clauses when dealing with unfixed goods.
  7. Be cautious when accepting deposits in large sums near the end of the financial year.
  8. Don't be easily swayed by builders offering deposits; consider the fine print and potential ulterior motives.
  9. Always assess the cost of retrieving a bank guarantee, especially if they are for less than $25,000.
  10. If you have the assets and the subcontractor agrees, using bank guarantees for retention can be a viable option.
  11. When offered bank guarantees for reasons other than retention, scrutinize the terms, timing, and conditions carefully.
  12. Reach out for expert advice to make well-informed decisions about bank guarantees and contract administration.

Remember, your financial security is paramount in your trade business, so make educated choices when it comes to bank guarantees. Stay tuned for more insightful episodes on the "Tricks of Your Trade" podcast!


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