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Top tips for contractors – securing your first bond
by: John Moore
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Let’s first consider just what exactly a surety bond is. To put it simply, a surety bond is an agreement in which one party guarantees to another that a third party will perform a contract as outlined by the original contractual agreement. The most important types of bonds to a contractor are bid bonds, performance bonds and payment bonds… the latter two usually being served as one.
Before issuing you with a bond, the bond broker will need to ensure that you are of good character and have the experience with which to complete the project as agreed. They will also need to find out your financial status in order to discover if you have the funds with which to effectively manage to work program. To summarise, the surety will want to be comfortable in the knowledge that you, as the contractor, are a well-managed, profitable entity who can complete tasks as outlined by the owner.
A professional bonding broker should guide you through all the ‘techical’ steps involved in setting up a surety bond. Despite the fact that the majority of surety firms are also insurance companies, becoming eligible for a bond should be compared to obtaining credit from your bank, rather than purchasing insurance. Much like your bank, a surety company will need to know you very well before putting forward its assets.
So, what do you need in order to better prepare yourself for getting bonded?
• An organisational chart of your company
• Business plan showing the work you do
• A portfolio of your completed work
• The plan for the future should any key member of your business fall ill
• Testimonials from your previous clients
If you can gather these items together prior to perusing a bond, you will have a far greater chance of obtaining the surety you require. You should also have available full and detailed monetary records for your business activities.
About the Author
The author of this article has discussed key issues involved in obtaining performance bonds for your company. You can learn more about corporate surety bonds by visiting the specialists at Bryant Surety.