REVENUE IS VANITY, PROFIT IS SANITY, BUT CASH IS KING
- What are Lease Bonds?
- What are Fit-out Bonds?
- Why a Lease Bond or Fit-out Bond?
- General Criteria to obtain a Lease Bond
- What’s the application process?
- Who is the Insurer?
Lease bonds are used to secure a commercial lease agreement and are worded identically to a bank guarantee. That is they are unconditional, irrevocable and payable on demand undertakings, and carry exactly the same obligations at law as a bank guarantee.
Typically, when entering a commercial lease with a landlord, the tenant is required to provide the land lord some form of surety equivalent to approximately 3 to 6 months rent in the event the tenant defaults on the lease or fails to make good the premises at the expiry of the lease. It serves as security for the tenant’s full and complete performance of the terms of its commercial lease and the tenant has the choice of providing a form of surety via an Assetinsure lease bond, security deposit or a bank guarantee.
In most instances a landlord may choose to give a lease incentive known as a fit-out contribution. This is geared towards fit-out activities such as partitioning changes, fixtures and fittings installations and other decorative touches that the tenant carries out in a particular property.
The landlord, on a reimbursement basis, contributes to the fit-out, provided that the tenant has supplied an Assetinsure lease bond, security deposit or a bank guarantee.
- Business to be operating for a minimum of 3 years
- Two full years continuous profitability
- Positive Cash flows
- Strong Working Capital ratio
- Low Gearing position
- Strong retained earnings position
For an initial pass, the tenant would provide the following information to complete our initial pre-vet assessment:
- Reference from the current landlord and if the premises have been occupied for less than 2 years, a reference from the previous landlord.
- Copy of (finalised) Lease Agreement between tenant and land lord
- Last 2 years consolidated signed financial statements (Including profit & loss; balance sheet) with supporting notes and specific commentary of which entities form the consolidated position.
- Most recent management accounts (trading, profit and loss and balance sheet) with supporting commentary for the same consolidated group of entities.
- Group Structure
- What is the purpose of each individual entity?
- The source of revenue for each individual entity?
- Copies of council rates notices or title searches for all real estate interests (unless accountant letter is provided)
- For private companies: Directors / Ultimate shareholders personal Assets and Liabilities statements
Lease bonds are issued by Lombard Insurance Company, an international specialist risk insurer with key areas of focus in construction, customs, fuel, mining rehabilitation guarantees and credit insurance. Lombard Insurance has been in business for 30 years and has been operating in the Australian market since 2008.
Assetinsure acts as agent for Lombard in Australia. Assetinsure has been an authorised general insurer in the Australian market since 2004, focusing on niche and specialist classes of business. Assetinsure is regulated by APRA and is the largest surety provider in Australia and New Zealand.