{"id":5521,"date":"2026-09-14T19:02:46","date_gmt":"2026-09-14T19:02:46","guid":{"rendered":"https:\/\/bearcapitalvl.com\/?p=5521"},"modified":"2026-09-14T19:07:51","modified_gmt":"2026-09-14T19:07:51","slug":"performance-guarantee-options-contractors","status":"publish","type":"post","link":"https:\/\/bearcapitalvl.com\/de\/performance-guarantee-options-contractors\/","title":{"rendered":"Bank Won\u2019t Increase Your Guarantee Facility? Performance Guarantee Options for Contractors"},"content":{"rendered":"

A contractor can have a signed contract, a viable project and a clear path to future revenue, yet still be unable to start because its bank will not increase the guarantee facility needed to provide performance security. This is a common financing constraint for business owners, managing directors, project sponsors and entrepreneurs with active construction, infrastructure, engineering or supply contracts. When existing banking capacity is fully committed, the solution may not be to abandon the project or wait indefinitely for a higher limit.<\/p>\n\n\n\n

Performance guarantee options for contractors can include alternative Bank Guarantee structures, Standby Letters of Credit and, where appropriate, broader project financing. Bear Capital Ventures Limited helps businesses assess these requirements and structure financing solutions around the actual contract, security requirement, project and funding need.<\/p>\n\n\n\n

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Ready to Secure Financing?<\/strong><\/h2>

Discuss your requirements with our specialists and explore a finance structure aligned with your objectives.<\/p><\/div>

Submit Your Request<\/a><\/div><\/div>\n\n\n\n

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Why a Bank May Not Increase Your Guarantee Facility<\/strong><\/h2>\n\n\n\n

A Bank Guarantee facility is normally subject to a defined credit limit and the bank’s assessment of the company’s overall exposure.<\/p>\n\n\n\n

A contractor may reach that limit because existing guarantees are already outstanding, additional collateral is required, the bank is unwilling to increase its exposure, or the company’s current facility no longer matches the size of its contracts.<\/p>\n\n\n\n

This can become particularly difficult when a new contract requires a substantial performance guarantee<\/a> before mobilisation or payment can begin.<\/p>\n\n\n\n

The important point is that a full guarantee facility does not necessarily mean the underlying project cannot be financed. It means the contractor needs to examine the available security and financing structure.<\/p>\n\n\n\n

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\"Large-scale<\/a><\/figure>\n\n\n\n

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What are the Performance Guarantee Options for Contractors?<\/strong><\/h2>\n\n\n\n

The right option depends on the contract, beneficiary, jurisdiction, guarantee amount and the contractor’s financial position. There is no single instrument that works for every project.<\/p>\n\n\n\n

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1. Increase or restructure the existing facility<\/strong><\/h3>\n\n\n\n

The first option is to establish whether the existing Bank Guarantee facility can be increased, restructured or supplemented.<\/p>\n\n\n\n

This may be suitable where the contractor’s banking relationship can support additional exposure. However, if the facility has reached a firm credit or collateral limit, this approach may not provide the required capacity within the project’s timeframe.<\/p>\n\n\n\n

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2. Arrange an alternative Bank Guarantee<\/strong><\/h3>\n\n\n\n

Where additional guarantee capacity is required, an alternative Bank Guarantee structure may be considered.<\/p>\n\n\n\n

This requires careful assessment of the beneficiary’s requirements, issuing arrangements, guarantee wording, amount, validity and applicable jurisdiction. The objective is not simply to obtain a guarantee, but to arrange an instrument that satisfies the contractual security requirement.<\/p>\n\n\n\n

Bear Capital Ventures Limited can assess the transaction and help determine whether a suitable Bank Guarantee structure may be arranged.<\/p>\n\n\n\n

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3. Consider a Standby Letter of Credit<\/strong><\/h3>\n\n\n\n

A Standby Letter of Credit<\/a> may provide another route where the beneficiary and contract permit this form of security.<\/p>\n\n\n\n

For an eligible transaction, it can provide credit support without relying solely on the contractor’s existing guarantee facility. However, acceptance should never be assumed. The contract or tender should first be checked to determine whether a Standby Letter of Credit is acceptable and what specific terms apply.<\/p>\n\n\n\n

For international projects, additional considerations can include the governing law, currency, payment terms and the requirements of the beneficiary.<\/p>\n\n\n\n

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4. Combine guarantee and project financing<\/strong><\/h3>\n\n\n\n

Sometimes the performance guarantee<\/a> is only one part of the contractor’s financing problem.<\/p>\n\n\n\n

A project may require funding for equipment, materials, labour, mobilisation and other costs before the contractor receives substantial project revenue.<\/p>\n\n\n\n

In that situation, arranging security alone may leave the business with a second financing gap.<\/p>\n\n\n\n

A broader structure incorporating project finance<\/a> or working capital financing<\/a> may therefore be relevant, depending on the project’s economics and contractual cash flows.<\/p>\n\n\n\n

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Check the Contract Before Choosing the Instrument<\/strong><\/h2>\n\n\n\n

A contractor should review the performance-security clause before pursuing an alternative.<\/p>\n\n\n\n

Important details include:<\/p>\n\n\n\n

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