Chapter 2 — Types of Surety Bonds
What Is an Advance Payment Bond?
An advance payment bond, also called a mobilisation or downpayment bond, secures the repayment or proper liquidation of an advance the owner releases before work is performed.
Why owners require it
An advance payment funds mobilisation before any work has been delivered. If the contractor does not proceed, the owner has paid for nothing. The bond gives the owner a means of recovering that advance.
Amount
The bond amount normally equals the full amount of the advance, since that is the sum at risk. Where procurement rules cap the advance at a percentage of the contract price, the bond follows that figure. Some arrangements allow the bond amount to reduce as the advance is liquidated through progress billings — check whether your contract permits this, because it can free capacity.
Validity and release
The bond typically remains in force until the advance has been fully liquidated or repaid. Contractors sometimes forget to request release after liquidation, leaving capacity tied up unnecessarily. Track liquidation against progress billings and ask for release once complete.
Relationship to other bonds
The advance payment bond sits alongside, not inside, the performance bond. Both may be required on the same contract, each securing a different exposure — one the advance, the other performance of the work. Together they consume capacity, which is why underwriters look at the total picture rather than one bond at a time.
Documents commonly required
- Contract or notice of award showing the advance payment provision and amount.
- Financial statements and registration documents.
- Project details, schedule and billing arrangements.
- Signed indemnity documentation.
Practical points
Do not request the advance before the bond is in place; owners will not release funds without it. Align the bond's validity with the expected liquidation period, and reconcile liquidation records with your billings so release can be requested promptly.
The insurer determines requirements, terms, pricing and issuance.
Key takeaway
An advance payment bond secures the advance itself, usually for its full amount, and should be released once the advance is fully liquidated.
Related topics
Relevant bond information
Need information about a surety bond requirement?
Submit an inquiry with your project details, and SuretyPH will organize your submission for the applicable insurer's evaluation.
Important Notice
SuretyPH is a digital platform for surety bond information, inquiries, and application facilitation. Submission of an inquiry or supporting documents does not constitute approval, binding, or issuance of a surety bond. Any formal application is subject to the requirements, evaluation, underwriting, terms, conditions, and approval of the applicable duly licensed insurance company.
SuretyPH is a digital platform for surety bond information, inquiries, requirements and request tracking. It does not underwrite, approve, bind, issue, or guarantee any insurance policy or surety bond. Evaluation, underwriting, approval, pricing and issuance are undertaken by the applicable licensed insurance company.