The Ins and Outs of Surety Bonds

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Has a potential client asked you for a surety bond? Do you know what it is? At a surety bonds glendale az company we can help shed insight on this product. A surety bond offers a type of insurance that guarantees you follow the regulations set out in a contract (work or financial related). Many city or municipal governments require contractors to have a surety bond to ensure they meet building codes. In some cases, a bank may also require a surety bond for a loan, especially if it is business related. In this case, the bond offers security because the bond issuer guarantees loan payments. 

Who Issues Surety Bonds? 

Insurance providers or specialized businesses offer surety bonds for a fee. These bonds come at different prices depending on the type of surety you need. Before you look for a surety bond provider in your area, you need to know the provisions the bond needs to cover. 

What Type of Surety Bond Do You Need? 

There are three basic categories for these bonds: bid, payment and performance bond. Surety bonds that cover bids guarantee your business commits to the payment promise when it is awarded. Payment bonds guarantee payment to workers on a project. Performance bonds offer a guarantee of the completion of a project. 

How Do You Get A Surety Bond? 

The first thing you need to do is organize your business and financial documents before you apply for the bond. This will make the process flow more smoothly. Look for a qualified bond company. Do a little research and read through the services offered. Determine whether you are the best fit for the fees and services of the bond companies you are comparing. Once you find a few bond companies or insurance companies offering the surety bond you need, check to see if you meet the bond requirements. If you do not meet the requirements, look for private bonds, and compare the fees and terms of these private bond options. To find local private bond issuers you can look online or talk to your local banker, contractor or real estate broker. 

Evaluate The Bond 

Once you have the offer of a bond, evaluate the offer and the paperwork. Read every clause, and if you are unsure of the requirements of the contract, contract an attorney to review the offer with you. When you are satisfied with the terms of a bond offer, sign the agreement and commit to the fees. Once you have the documentation, submit the surety bond to the supplier, client, agent or lender to meet the need. 

Things You Need to Take With You 

The contract or documents 
Business financials 
A recent credit report. 

Bond issuers assume the responsibility if you fail to meet the terms of the contract. To issue you a bond the provider will research your personal and business background to determine the risk you pose. There is complex research involved in getting a bond, and the process can take a few weeks to complete. You want to plan ahead for the project requiring the bond and start about four weeks before you need it.

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