As interest rates and construction costs skyrocket, pressures are being placed on the funding streams of developers.
For developers, tying capital up in deposits and guarantees can be complex and restrictive.
To combat this challenge, online surety bond provider Smartbonds has launched QBE SmartBonds.
They aim to replace cash deposits and bank guarantees as security in the development or planning application process, according to Smartbonds managing director John Gardiner.
“When you lodge a development application with your council, whether it is for a new development, renovation, home or an office building, one of the conditions of development consent is that council will often require a security deposit from the applicant,” Gardiner said.
Up until now a developer’s only option has been a cash deposit or bank guarantee. Developers now have another choice, QBE SmartBonds are an unconditional, open-ended undertaking in favour of a council that is guaranteed by QBE Insurance which requires no collateral security from the developer.
“From a developer perspective, rather than quarantining working capital for the life of the development, they can now lodge a Council SmartBond underwritten by QBE instead and keep their working capital.”
Meanwhile from a council’s perspective, QBE SmartBonds reduce their administrative costs and provide the peace of mind they require should a development go astray. Bonds can be verified online and claims settled by EFT within five working days.
Gardiner said that Council Smartbonds solve some topical issues facing developers.
It is not only councils where SmartBonds can assist, they can also bond other government agencies such as water and electricity authorities.
“The key problem is interest rates are going up, so the cost of doing business is going up and the pressure on working capital is increasing.
“It’s possible that developers could even replace existing bank guarantees and cash deposits that are already with councils with our bond, releasing valuable working capital for both existing and future projects.
“It’s music to the ears of developer CFOs.”
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