Consider a Chief Financial Officer faced with three major tenders, each requiring a €500,000 guarantee, while the company’s liquidity cannot support participation in all three.
With traditional bank guarantees, the options are to commit €1.5 million to participate in all three tenders or select one and forgo the others.
For years, this was the challenge for businesses in Cyprus competing for public and private contracts, until an innovative insurance solution emerged.
Surety Bonds were introduced in Cyprus, allowing businesses to obtain letters of guarantee from insurance companies. SoEasy Insurance Brokers led this initiative, and hundreds of companies have already benefited from this alternative.
The Capital Lock-Up Trap
For decades, bank guarantees were the only option for companies participating in tenders. However, they required significant cash collateral, mortgages, and security deposits, and limited the ability to compete in multiple tenders.
For a construction company needing €1 million in guarantees, this amount remains unavailable in the bank rather than being used for equipment, salaries, materials, or investments. This leads to reduced working capital, limited growth, and missed opportunities.
This is a common challenge for CEOs and CFOs.
The Alternative That Changes Everything
Surety Bonds from insurance companies provide a practical solution to this challenge, offering several measurable benefits:
Capital Efficiency: The business does not tie up liquidity. Instead of reserving €500,000 in the bank, it pays only a premium, typically 2-3% of the guarantee amount, resulting in a cost of €10,000-15,000.
Multiple Participations: With available capital, a business can compete in several tenders simultaneously, provided it has the operational capacity. This increases the likelihood of winning projects and expanding growth opportunities.
Improved Cash Flow: Retained capital can be invested in equipment, personnel, materials, or new projects, enhancing competitiveness and enabling the company to pursue larger contracts.
Financial Flexibility: Liquidity ratios and working capital improve, as no funds are restricted. This strengthens negotiating power with suppliers and creditors.
SoEasy Insurance: The Pioneer in Cyprus
SoEasy Insurance was one of the first companies to introduce Surety Bonds to the Cypriot market, bringing an innovation previously unfamiliar to most businesses.
Through strategic partnerships with international insurance giants such as Axeria IARD (rated A- by AM Best and part of the Arch Insurance Group), SoEasy offers its clients letters of guarantee that are fully accepted by government agencies, semi-governmental organizations, and private companies.
SoEasy distinguishes itself through a streamlined process and a fully digital environment. Many entrepreneurs have already leveraged surety bonds to support growth without restricting their assets.
The Difference in Numbers
The following example illustrates why CFOs are adopting this approach:
Scenario: A construction company wants to participate in 3 tenders, each requiring a €500,000 letter of guarantee.
With Bank Guarantees:
- Total collateral required: €1,500,000
- Participation in all three is not possible unless the company has substantial liquidity reserves.
- The company must choose only one tender.
- Opportunities for the other two projects are lost.
With Insurance Surety Bonds:
- Total premium cost: €30,000-45,000
- Liquidity: €1,500,000 remains free
- Participation in all 3 tenders
- The company has three times the opportunity to secure a contract.
- The €1.5 million can be allocated to production or other business needs.
The return on investment is clear: for approximately €40,000, the company gains three opportunities instead of one while preserving its working capital.
A New Era for Businesses in Cyprus
Letters of guarantee are no longer the exclusive domain of banks. CFOs seeking financial flexibility, improved liquidity, and greater growth potential now have a clear alternative.
As Yiannis Nicolaou, Managing Director of SoEasy Insurance, emphasizes: “Our goal is to provide insurance solutions that free businesses from constraints and enable them to grow. Surety bonds aren’t just a product—they’re a strategic growth tool.”
For more information about Surety Bonds and how they can help your business, contact one of the insurance brokers in the company’s network or SoEasy Insurance’s specialized team at 7777 4567 or info@soeasyinsurance.com.cy.