One of Canada's fastest growing communities says it is now able to accept surety bonds rather than letters of credit (L/Cs) to help free up capital for developers.

The town of Cochrane in the Canadian province of Alberta says it will now be accepting surety bonds as a form of security for new subdivision and development permit applications.

Key advantages

The town's civil land development manager, Ryan Stewart, says the surety bonds are almost identical to the L/Cs developers commonly use but cost them less.

"Essentially, L/Cs have a higher fee than surety bonds, and it just simply provides another option of security for the development community," according to Stewart.

He says the bonds provide the town with practically the same financial assurance as L/Cs and ensure the successful completion of the obligations under either a development agreement or servicing agreement.

Growing trend

The move responds to requests from several developers who approached the town asking if they could replace L/Cs with surety bonds and can only be used to back new agreements.

Five other Alberta municipalities already accept the bonds: Calgary, Edmonton, Airdrie, St. Albert, and Strathcona County.

A surety bond is a guarantee in which a third party, often an insurance company, agrees to assume a defaulting party's obligations.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.