Bonds to enter into a manufacturing contract

A weakness in the value of local currency often provides opportunities to export from any market. You might never have expected to receive an order from overseas, and then at a time when the economy looks weak, a contact is made and the chance to win a new customer and gain revenue appears.

That event may lead to new plans and strategies to grow overseas. One of the first steps to be taken is to discover the challenges and obstacles that stand in the way of successfully meeting orders when they are received.

Pressure on cash flow will certainly be among them. Order and payment cycles may well be longer than in domestic trading. You may have concerns about the credit worthiness of the customer and on their side too, there may be concerns – can you meet the order as specified, will your business be able to keep to the terms agreed? The deal timescale may run to several years, adding another degree of complexity to the calculation.

This is where bonds play their part. Each stage of the trade cycle is supported by a specific type of bond or guarantee, from bidding for a contract through to performance guarantees that last beyond the date of the contract and into warranty periods. You will need to decide whether to use an on-demand bond or a conditional bond, giving different levels of protection on each side.

So how to use a bond? Get advice when you are using bonds for the first time. While the principles are easy to understand, the details should be matched to your own situation and the transactions you are negotiating. Our team of experts is ready to advise and support your business deals. Get in touch and find out more about our bonds for manufacturers.