How Surety Bonds Help Resolve Key Challenges for Infrastructure Contractors in India

Infrastructure Projects: High Potential, High Challenges 

Infra contractors in India face complicated tender rules, delayed payments, cash flow issues, compliance requirements, and increasing pressure to deliver projects on time. 

Surety bonds solve many of these pain points by replacing traditional financial instruments and improving working capital, credibility, and compliance in a contractor's workflow. 

What Are Surety Bonds?  

A surety bond is a financial guarantee that ensures a contractor will fulfill a contract.  If the contractor fails, the surety steps in to compensate the project owner or help complete the work. 

Surety bonds are now widely accepted in: 

• government tenders 

• EPC contracts 

• infrastructure projects 

• supply & service agreements 

Challenges Faced by Infrastructure Contractors — and How Surety Bonds Solve Them 

Cash Blocked in EMDs and Bank Guarantees 

The Problem: 

Contractors often lock huge sums of money in: 

• Earnest Money Deposits (EMDs) 

• Performance Bank Guarantees (PBGs) 

• Advance payment guarantees 

This reduces liquidity and restricts bidding capacity. 

How Surety Bonds Help: 

✔ Bid Surety Bonds replace EMD   ✔ Performance Bonds replace PBG   ✔ Advance Payment Bonds replace APG   ✔ No need for heavy collateral   ✔ No cash blockage 

Result: More working capital + ability to bid for more tenders. 

Limited Tender Participation 

The Problem: 

A contractor can only bid for as many tenders as their cash allows. 

Surety Bond Advantage: 

With no EMD cash blocking, contractors can participate in multiple tenders simultaneously, increasing chances of winning projects. 

Difficulty in Obtaining Bank Guarantees 

The Problem: 

Banks demand collateral, margin money, or FD backing.  New companies or SMEs find it nearly impossible to get large bank guarantees approved. 

Surety Bond Solution: 

✔ No collateral in most cases   ✔ Low premium instead of blocked cash   ✔ Faster approvals   ✔ Support for SMEs, new contractors, and growing infra firms 

Payment Delays & Cash Flow Stress 

The Problem: 

Infra contractors often face delayed payments—even though they need to keep spending on labour, materials, and equipment. 

Surety Bond Help: 

By reducing cash blockage (EMD/PBG/APG), surety bonds free working capital, allowing contractors to maintain: 

• smoother operations 

• better labour deployment 

• steady material supply 

Compliance Burden in Government Tenders 

The Problem: 

Government tenders involve strict financial rules and documentation. 

Surety Bond Benefit: 

Surety bonds are recognised under updated procurement policies in India.  They simplify compliance by being:   ✔ tender-approved   ✔ digitally issuable   ✔ easier to maintain than BGs 

Project Execution Risk 

The Problem: 

Project owners worry about delays, poor quality, or contractor default. 

Surety Bond Solution: 

• Performance Bonds guarantee project completion 

• Warranty/Maintenance Bonds ensure defect-free performance 

• Bid Bonds ensure serious and committed bidding 

This increases trust and credibility for contractors. 

 

Types of Surety Bonds That Help Infra Contractors 

Bond Type	When It's Used	How It Helps
Bid Surety Bond	Bidding stage	Replaces EMD, frees cash
Performance Bond	After tender award	Ensures project completion
Advance Payment Bond	When receiving advance	Protects buyer; speeds payment release
Warranty/Maintenance Bond	Post-completion	Ensures defect liability compliance
Supply Bond	Material & equipment delivery	Guarantees timely supply

Why Surety Bonds Are Becoming Essential in India’s Infra Sector 

✔ Increased project volume 

✔ Government acceptance of surety bonds 

✔ Push for faster project execution 

✔ Need for more financial flexibility 

✔ Growing participation from SMEs and mid-sized contractors 

Surety bonds help contractors scale without restricting capital. 

How Assurety Supports Infrastructure Contractors 

Assurety makes the entire bonding process simple and fast: 

• ⚡ Digital application 

• 📄 Minimal paperwork 

• 💰 Low premiums 

• 🔒 No heavy collateral 

• 🚀 Fast issuance for urgent tenders 

• 🧩 End-to-end guidance for all bond types 

• 🤝 Support for SMEs, startups, and large contractors 

Whether you're bidding for a new project or executing a major EPC contract, Assurety ensures you get the right bond for your needs. 

FAQs 

1. Are surety bonds accepted by government bodies in India? 

Yes. They are recognised under procurement reforms. 

2. Are surety bonds cheaper than bank guarantees? 

Yes—surety bonds require a small premium, while BGs block cash or require collateral. 

3. Who can apply for surety bonds? 

Contractors, EPC firms, suppliers, and service providers across infrastructure sectors. 

4. Do surety bonds require collateral? 

Not in most cases. 

5. How fast can Assurety issue a bond? 

Often within hours, depending on the documents. 

Conclusion 

Surety bonds reduce financial pressure, unlock working capital, simplify compliance, and improve project execution for infrastructure contractors. 

With Assurety, contractors get a faster, easier, and more affordable route to secure all types of surety bonds—helping them scale confidently in India's fast-growing infrastructure sector.