Why is funds control sometimes required for bonding?
Like collateral, funds control is not normally utilized in the standard surety markets. In the alternative or substandard surety marketplace, funds control may be required when a bonding situation is viewed as hazardous, if the contractor is financially challenged, or because of the lack of credible financial information. Funds control may also be required when joint venture partners have not worked together previously. Funds control protects the surety by ensuring that project payouts are used exclusively to fund appropriate project expenses. Typically, there are fees associated with funds control programs.
