Surety Bonds: the Basics

If you are a contractor of car dealer, you may find that you need to have a surety bond. This bond is an agreement where the provider, “surety”, promises to cover a default by the principal to an obligee. Basically, a professional would get a surety bond to guarantee they will meet their promises. The surety bond would pay if they did not. Once you know that you need a surety bond, you will find the process to be straight-forward.

There are two main categories of surety bonds: Contract and Commercial. Contract bonds cover construction projects and Commercial surety bonds cover the performance of other professionals. Contract bonds assure that the contractor will meet its obligations in a building project. Contractors can get surety bonds for each stage of a project from bidding to maintenance. Commercial bonds are often required by state licensing boards for certain businesses like car dealers and health spas. In addition, some professionals, like treasurers, get commercial bonds to guarantee their performance.

To get a surety bond, you need to find a reputable surety bond provider. You can find a reputable dealer on the web, through your professional organization or by getting a referral form your insurance agent. A professional surety agent will be able to help you choose the right bond and insurance company to meet your specific needs. Getting a surety bond will require completing an application for the prequalification process. The application will likely ask for your personal information, business and financial information and project requirements. Most applications will have a fee to cover processing and credit checks.

The goal of prequalification is for the surety to be confident that you can provide the services the surety bond is guaranteeing. The provider may ask for financial records and letters of recommendation. They will verify that you can meet the needs of your project and can obtain the necessary equipment. By providing bonds only to reputable companies, a surety provider can make the best investment.

Once you complete the surety bon pre-qualification process, you can buy the bond. The premium for a surety bond will depend on many factors including your provider and your credit score. A typical range is one-half to two percent of the contract amount. Some high-risk bonds may require a ten percent or higher premium.

If you need a surety bond, you can find reputable companies on the web and through your insurance company. They will help you complete the application process and make sure that your business is set up for success.

For more information about surety bonds or to learn how a surety bond might help your business visit http://www.surety1.com

Source by Groshan Fabiola

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