How Do Surety Corporations Verify Line of Credit for the Contractors Who Apply for Performance Guarantee at the First Time

摘要

Surety corporations have played an irreplaceable role as one of main parts in engineering surety bonds system. When the contractors applied for the performance guarantee at the first time, the surety corporations need to evaluate the contractors' performance capability in order to ensure the line of credit for contractors. During the first application of performance guarantee, on the condition of low loss ratio, maximizing the line of credit for the contractors was significant to the Chinese contractors who had disadvantages of low equity, stress of fund shortage and low staff proficiency. Besides it was beneficial to promote the wide use of the performance guarantee in China. Therefore, the issue that how the Chinese surety corporations ensure the line of credit effectively was worthy of concerning. In this essay, the factors that affected the line of credit were analyzed then a proper formula to calculate the line of credit when surety corporations provide the guarantee for the contractors was educed. It might be beneficial for the Chinese Surety corporations to ensure the line of credit effectively.