What’s A Surety Bond, and When Do I Need One?
Are you a contractor bidding on work that requires a surety bond? Do you have questions about what a surety bond is, why you might need one, and how to get one?
If so we are able to help.
What’s A Surety Bond?
First things first: what’s a surety bond, anyway? Essentially, a surety bond is an insurance policy between the contractor, the client and a third-party surety bond company that covers your promise – and ability – to complete the terms of a contractual agreement. Instead of you having to put up cash as a deposit, you get a surety bond.
When Will I Need A Surety Bond?
If you want to bid on public construction contracts and many private contracts, you’ll probably need a surety bond. For example, surety bonds are mandatory for any federally-financed construction project valued over $150,000 and are mandatory on many state projects as well. Commercial contracts for manufacturing and service or supply work may also require a surety bond.
Am I Eligible? How Can I Apply?
Because SBA does not offer bonds directly, you’ll need to first apply with a surety company or agent. The underwriting for surety bonds varies depending on the issuer, but there are a few key factors that most sureties consider when evaluating your company’s application. Among these are: the adequecy of working capital and cash flow to complete the project; past performance history, business debt and equity, and the capacity to complete the contract, and the personal history and character assessment. Surety companies often refer to these requirements as the “three C’s – capital, character and capacity.”
If you have any questions or are in need of a bond quote, contact us today at (877)277-9036
Source: U.S. Small Business Administration