Steps to Obtain Surety Bonds
Surety bonds are contracts between a business, bonding company and third party. They are purchased by businesses to confirm the fiscal worthiness of a company as well as to offer affirmation on their reputation. If a business should fail to comply with a contract the bond acts as financial coverage to the third party.
Obtaining any type of financial backing or support for a business venture comes with a process of verification. The same is true of business of all sizes seeking surety bonds. Companies specializing in surety bonds offer assistance to business owners seeking to obtain bonds through agents acting on their behalf.
Surety bond agents guide business owners through the bond process helping them to understand how the history of their business will affect the bonding process on a whole. They are dedicated to working with business to examine contracts that require bonds and help determine a proper fit between their business, projects and the bond company. A surety bond agent works to examine the business, assess client’s needs and prepares a submission to the surety bond company. This is just the start for business owners looking for surety bonding.
The next step in surety bonding after an initial meeting between a bond company and a business owner is working with an underwriter to complete a history of your business and financial setup. This is to access your overall risk. The underwriter seeks to determine that you are not at any risk for being able to complete a project as specified within a given contract. The information the underwriter will obtain consists of the business plan, future projections, positive cash flow, healthy credit, professional references and information on the chain of command within the business.
Prepare ahead of time by seeking out items such as annual finance statements for at least the last three years, cash flow statements, current accounts receivable and payable as well as an understanding of the accounting method used within the business.
Depending on the information provided on the company’s history and current financial situation the surety company give a rate in which the bond is to be issued at. A solid history and financial status allows owners lower rates; a total of one to three percent on the total bond. A business with risky historical data and uncertain financial situation can find themselves paying upwards of fifteen percent on a bond rate. The rate is dependent upon the risk the business, the more likely the business is to default the higher rate they must pay the surety company for the bond. The bond is normally paid in one single payment.
Obtaining a bond can be an expensive endeavor. To ensure that the business is qualifying for the best rate or to receive quotes from different companies before making a bond purchase go online and research the options available in the state in which business is conducted. Surety bonds protect business owners and the people that are doing business with them from the risks involved throughout the process. The most common bids obtained in the construction bonding process include: bid bonds, performance bonds and payment bonds. Seek out a professional bonding company today to ensure the business and those it contracts with are covered in case of default.
Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs. Find out more information at https://www.bondingspecialist.com.