When you’re managing a construction project, there’s already enough complexity—finances, timelines, planning, and compliance. So when a lender, client, or local authority asks for a performance bond, what exactly does that mean—and why is it important?
This short, jargon-free guide breaks down performance bonds for UK developers and commercial project leads.
What is a Performance Bond?
A performance bond is a type of guarantee that protects the client or funder if the contractor fails to deliver the project as agreed.
It’s usually issued by an insurer or surety provider and acts as a financial safety net—ensuring that the project is completed or the client is compensated, even if the contractor defaults or walks away.
Why Are Performance Bonds Important in Construction?
Construction projects come with risk. Even the most reliable contractors face unexpected challenges—cash flow issues, supply chain problems, or insolvency.
Here’s why a performance bond matters:
- Reduces risk for funders and developers
- Meets public sector and lender requirements
- Strengthens your credibility in competitive bids
- Protects your project’s timeline and budget
When Might You Be Asked for One?
You may need a performance bond if:
- You’re bidding on a public sector project
- Your lender or investor requires additional security
- You’re entering a joint venture with multiple stakeholders
- You’re a developer contracting out to third parties and want protection for delivery
Most bonds cover 10% of the contract value, and they typically last until practical completion.
How Do Performance Bonds Work?
- Bond is arranged by the contractor or developer (through an insurer or broker)
- Bond is issued in favour of the project owner, client, or funder
- If the contractor fails to deliver, the bond provider steps in—either financially or by arranging completion
It’s not a substitute for good project management, but it provides an important layer of delivery confidence.
Is a Performance Bond the Same as a Retention?
No—retentions hold back a portion of the contractor’s payment until the job is completed properly. A performance bond is a separate, formal guarantee issued by a third party.
In many large or high-risk projects, both are used together to manage different types of risk.
How to Get Quotes For Performance Bonds
At Checkmate, we support developers with fast, compliant bond solutions backed by regulated, A-rated insurers.
We’ll guide you through:
- Structuring the bond correctly
- Meeting lender or authority requirements
- Minimising admin and delays
Whether it’s a commercial build or a residential scheme, we help you protect your position and deliver with confidence.
Need Help? Talk to Our Experts
If you’re unsure whether you need a performance bond—or need one issued quickly—get in touch. Our team will explain your options in plain terms and get the process moving.
