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  • Andrew Mangialardi

Cannabis Construction – Reducing your Risk through Surety Bonds

Updated: Aug 8, 2018

Picture this – you’re about to break ground on your new multi-million dollar growing

facility, you’re under extremely tight deadlines, and you need everything to fall into place to begin production in Q2 of 2018. It’s paramount you and your team forecast second quarter numbers into your 2018 budget, and you’re accountable to shareholders to meet the deadlines.

Would you be interested to learn that a Surety Bond could be used as a third party guarantee to safeguard your construction timelines?

What Are Surety Bonds?

Surety bonds are a readily available pre-qualification tool used broadly across the US, and by the government and large sophisticated buyers of construction services here in Canada. Surety bonds address the risk of a contractor failing to perform the contract and leaving you, the licensed producer (LP), with a partially completed project or with unpaid labour and material liens.

How Can a Surety Bond Help Me as a Medical Marijuana Producer?

If you are an LP that requires a surety bond on your project, you could download the risk of construction non performance, or lien risk by a subcontractor or supplier. Downloading this risk could drastically reduce the timeline risk associated with your build-out. LP’s typically require some form of third party project financing for the initial construction of their grow facility. Off-loading a significant portion of the associated construction risks will set you apart from your competitors and can reduce your cost of capital.

In addition to project specific construction insurance, all sophisticated and financially stable general contractors have access to bonding facilitates. Asking for a surety bond not only will set you apart as an LP, but will ensure you’re using a well-qualified, professional general contractor. Securing your bond facility will provide an irrevocable guarantee for your construction project.

In Canada the Standard bonding requirements for the Construction industry for a general contractor are a Performance Bond for 50% of the contract value and a Labour & Material Payment Bond for 50% of the contract value.

Contact us with any questions you might have about construction/contract surety and the process to obtain a bond. We'll help you get started today!