Surety Bond & Guarantee FAQ
The most common questions about surety bonds, bank guarantees, performance bonds, and judicial and tender guarantees — answered. Clear guidance on cost, court acceptance, Brazil's Law 14.133, counter-guarantees, and issuance timelines, so you can choose and obtain the right guarantee.
Fundamentals
What is a surety bond?+
A surety bond is a three-party agreement in which a surety (insurer) guarantees to an obligee (the protected party) that a principal (the party performing) will meet a contractual, court, or customs obligation. If the principal defaults, the surety compensates the obligee up to the bond amount and the principal reimburses the surety. It guarantees performance — it is not a loan.
Learn more: What is a surety bond
What is the difference between a surety bond and a bank guarantee?+
A surety bond is a three-party insurance product issued by a surety that investigates a claim before paying and does not tie up your bank credit line. A bank guarantee is a two-party bank instrument that uses your credit line and usually pays on demand. The surety bond preserves liquidity and stays off the balance sheet.
Learn more: Surety bond vs bank guarantee
Bank letter of guarantee or surety bond — which is cheaper?+
In most cases the surety bond is cheaper: the premium is roughly 0.5% to 5% of the guaranteed amount per year, while a bank letter of guarantee typically costs 2% to 6% per year and also consumes your credit line. Beyond cost, the surety bond does not freeze your cash or bank lines.
Learn more: Bank guarantee vs surety bond
What are performance, bid, and payment bonds?+
A performance bond guarantees the principal completes the contracted work or service. A bid bond guarantees a bidder honours its proposal and signs the contract if awarded. A payment bond guarantees subcontractors and suppliers are paid. They are distinct bonds covering different phases of a contract.
Learn more: Performance bond vs payment bond
Does a surety bond consume my bank credit line?+
No. Unlike a bank guarantee, a surety bond is underwritten by the surety based on the principal's credit analysis, without freezing your bank line or requiring cash collateral. Your credit lines remain free for working capital and other operations.
Do I need a guarantor for rental guarantee insurance?+
No. With rental guarantee insurance the insurer itself secures the rent, condo fees, and property tax, removing the need for a guarantor or cash deposit. It applies to residential and commercial leases, with fast approval based on a credit review.
Learn more: Rental guarantee insurance
What is an SKR and can I "monetize" it?+
An SKR (Safe Keeping Receipt) is a custody receipt issued by a regulated custodian that only attests to holding an asset. It is not a bank guarantee, not an SBLC, and not a "monetizable" instrument. Promises to "monetize" or "leverage" an SKR for credit are a classic fraud red flag.
Learn more: What is an SKR
Is the guarantee accepted internationally?+
Yes, depending on the bond type and wording. Bid, performance, and advance payment bonds follow international standards and can be issued for obligations abroad, subject to the governing law and each obligee's requirements. The bond wording is tailored to the contract and jurisdiction.
Cost & Timelines
How much does a surety bond cost?+
The premium is usually 0.5% to 5% of the guaranteed amount per year, based on the bond type, amount, term, and the principal's credit profile. For example, a R$100,000 bond for one year at 2% costs around R$2,000. The stronger the principal, the lower the rate.
Learn more: Surety bond cost
Is the premium paid once or per year?+
The premium is quoted on an annual basis and is due while the bond is in force. For bonds shorter than a year the premium is prorated; for multi-year obligations it renews (or is paid in instalments) each period. It is not a deposit — it is the cost of the risk the surety assumes.
How long does it take to issue a guarantee?+
With complete documentation, analysis and issuance usually take 24 to 72 hours. Simple cases with a good credit history can be issued the same day; larger or structured obligations may need extra underwriting time. ERGO uses agile analysis to speed up issuance.
Judicial Guarantee
Do courts accept a surety bond instead of a cash deposit?+
Yes. Article 835, §2 of Brazil's Code of Civil Procedure equates the judicial surety bond to cash for attachment purposes, and the labor courts (TST) accept it in place of the cash appeal deposit. The bond typically covers the debt plus 30%, as required by the proceeding.
Learn more: Judicial surety bond for labor claims
Can I replace a cash deposit I already made?+
Yes. You can ask the court to replace a cash deposit with a surety bond (with the 30% add-on required by the code), freeing the amount back into your working capital. Replacement is common in tax, civil, and labor enforcement and depends on the court's approval.
Learn more: Replacing a court cash deposit
Public Tenders
What guarantees does Law 14.133 require?+
Brazil's Law 14.133/2021 admits the surety bond both at the bid stage and for contract performance. The performance guarantee is capped at 5% of the contract value, rising to up to 30% for large-scale engineering works, in which case the step-in (retomada) clause is required.
Learn more: Surety bond under Law 14.133
What is the step-in (retomada) clause?+
The step-in clause lets the surety take over and complete the contract if the principal defaults, instead of only paying an indemnity. Under Law 14.133/2021 it is required for guarantees up to 30% on large works, giving the public authority stronger assurance of completion.
Getting a Bond
Does the customs authority accept a customs bond?+
Yes. The customs bond is accepted by Brazil's Federal Revenue to replace cash deposits in foreign-trade regimes and operations such as transit, temporary admission, and instalment plans. It frees capital and speeds up imports and exports, with a typical cost of 1.5% to 4% per year.
Do I need a counter-guarantee or partners' personal guarantee?+
It depends on the risk. The surety reviews the principal's finances and track record and may require counter-guarantees — such as the partners' personal guarantee, receivables, or other collateral — especially for large amounts or higher-risk profiles. Strong companies often obtain the bond with reduced or no personal guarantee.
How do I get a quote?+
Just provide the obligation to secure (contract, tender notice, lawsuit, or customs operation), the amount, and the term. ERGO reviews the request and returns a proposal with the rate and conditions. You can request a quote online or talk to a specialist on WhatsApp to speed up issuance.
Still have questions about your guarantee?
ERGO issues surety bonds, bank guarantee alternatives, and performance bonds without freezing your credit line. Get a tailored quote or talk to a specialist.