14 Apr Rental Guarantee
With businesses under pressure in these lockdown times, the challenge is to find new and innovative ways to improve liquidity and cash flow. Landlords are facing a potential rental disaster with tenants unable to make their monthly rentals while also facing the potential of shutting their doors if the current situation does not improve.
It is common practise for Landlords to ask for up to 2-3 months rental deposit as a “safety net” in the event of non-payment or to make repairs. However, in these times, a 3 month cash deposit can be a large amount to take out a businesses cash flow.
This is where rental Guarantees can play a part and assist. Instead of putting up a 3 month cash deposit, businesses can raise a guarantee with an insurance company in lieu of a cash deposit. Provided the business meets the underwriting requirements for the rental guarantee, the guarantee can serve as the security required for the deposit.
The benefit to the tenant would be:
- Frees up cash flow and liquidity;
- Able to utilise funds as they see fit instead of having funds deposited into outside bank account.
The benefits to the Landlord would be:
- Having the security and knowing they will be covered for the Guarantee amount in the event of non payment;
- Knowing the client has been vetted by a financial institution;
- Ease of use – Instead of having to monitor funds in accounts, Landlords can keep the Guarantee as proof of cover.