What is a Bid Bond in Iowa?
A bid bond is a type of surety bond, that guarantees that the bidder will take the job and complete it according to its terms. It provides assurance to the project owner that the bidder has the knowhow and ability to finish the job once the bidder is selected after winning the bidding process. The simple reason is that you need one to get the work. But the larger question is why are more owners/developers requiring a surety bid bond? The answer is risk. Given the uncertainty of the marketplace, which includes long-term contractors closing shop, to municipalities filing bankruptcy (or just slow paying), has led to owners being afraid that their contractors will be unable to finish the work. So, they require a some protection.
A bid bond is issued as part of a bid by a surety bond company to the project owner. The owner is then assures that the winning bidder will take on the contract under the terms at which they bid.
Most bid bonds contain a bid percentage (usually 5% or 10%, is forfeited if you don’t accept the job).
How much does a Bid Bond Cost in Iowa?
Swiftbonds does not charge for a bid bond (with two exceptions, see below). The reason that we don’t charge for a bid bond is that we will charge for the contract bond if you win the bid. The cost can vary widely depending on the amount of coverage that is required (see below).
Two exceptions for bid bond charges:
1) We do charge for Overnight fees
2) We will charge you if there is NOT going to be a bond covering the subsequent contract.
How much do bonds cost in IA?
Bond prices fluctuate based on the job size (that is, it’s based on the cost of the underlying contract). The cost of a bond is estimated through a couple of back-of-the-envelope calculations. In general, the cost is approximately three percent (3%) for jobs under $800,000 and then the percentage is lower as the contract amount increases. We work diligently to find the lowest premiums possible in the state of Iowa. Please call us today at (913) 286-6501. We’ll find you the very best rate possible for your maintenance bond or completion bond. Things that can affect this pricing are the perceived risk of the job, the financial position of the entity being bonded, plus other factors.
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These rates are for Merit clients, Standard rates are higher
How do I get a Bid Bond in Iowa?
We make it easy to get a contract bid bond. Just click here to get our Iowa Bid Bond Application. Fill it out and then email it and the Iowa bid specs/contract documents to [email protected] or fax to 855-433-4192.
You can also call us at (913) 286-6501. We thoroughly review each application for surety bonds and then submit it to the surety that we believe will provide the best surety bond for your contract. We have a great success rate in getting our clients bid and P&P bonds at the very best rates possible.
What is a Iowa Bid Bond?
A bid bond is a bond that assures that you will accept the work if you win the contract. The bid fee (usually 5% or 10%) is a fine that is paid when you win the bid, but then decide not to take the work.
Find a Bid Bond near Me
Typically, a bid bond and performance/payment bond are done together in the same contract by the surety. This way, the owner of the project is assured that the project can be completed pursuant to the terms of the contract and that it will not be liened by any contractor. The bond is risk security for the benefit of the owner.
Who Gets the Bond?
The general contractor is the corporation that obtains the bond. It is for the benefit of the owner (or in the case of government contract work, the governmental entity). It’s the general contractor that has to apply for the bond and be underwritten before the bid bond is written by the surety. This is also known as bonding a business.
We provide bid bonds in each of the following counties:
See our Kansas Bid Bond page here.
More on Surety Bid Bonds https://swiftbonds.com/bid-bond/.
News On How To Obtain Bid Bonds
Bid Bonds can be complicated to understand, especially if you don’t understand how they work. Most individuals consider this as insurance, but it’s actually a type of guarantee that the principal will perform their work properly for the obliged. Insurance companies usually offer a Surety Bid Bond, but you cannot call it insurance because its function is different. Most individuals will require you to get a bid bond before they think about your services as it is a form of guarantee to them.
If you’d like to consider applying for a bid bond or other bonds, you must understand how they work. We will offer you info on the significance of Bid Bonds and how they actually work.
The Importance Of A Surety Bid Bond
Bid Bonds will almost always be in demand to protect the public because it is a kind of assurance that your obligations and duties will be complete. Most states require you to get a license surety bond to ensure that your company will adhere to state code and laws and you get a contract bond to guarantee that a public project will be completed. A Surety Bid Bond is meant for the obliged since they are the ones that are being protected, but it will also benefit you because the clients will trust you and your work. There are thousands of bonds right now and the type of bond that you are trying to find would depend upon your situation.
The Primary Work Of A Surety Bid Bond
Bid Bonds are a three-party agreement between the principal, the obliged and the surety company. The principal is the employer or company which will perform the work and the obliged is known as the project owner. Construction companies will almost always be required by law to acquire Bid Bonds if they’re chosen for a public project. The government will require a construction company to get a host of bonds before they work on a certain project. The bond will ensure that the sub-contractors and the other workers will be paid even if the contractor defaults. The contractor will cover the losses, but when they reach their limit, the duty will fall to the surety company.
How To Apply For A Surety Bid Bond
Bid Bonds are provided by insurance providers, but there are standalone surety businesses that focus on these products. A surety company must be licensed by a state Department of Insurance.
It won’t be easy to apply for a bond since the applicants will have to go through a process that is comparable to applying for a loan. The bond underwriters will look into the credit profile of the applicant, their financial history and other key factors.
It means that there is a chance that you won’t be approved for a bid bond, particularly if the bond underwriters see something from your credit rating.
How Much Will You Spend?
You cannot put an exact cost on a Surety Bid Bond because the cost is affected by numerous factors like the bond type, bond amount, where it will likely be issued, contractual risk, credit history of the applicant and more. There are thousands of different bonds available today and the cost will depend on the bond that you want to get. The amount of the bond will be a factor because you could select a $10,000 bond or a $25,000 bond or higher.
If you already have a credit history of 700 and above or very near this number, you can be eligible for the standard bonding market and you will need to pay 1 to 4 percent of the Surety Bid Bond amount. It means that if you may obtain a $10,000 bond, you only have to pay $100 to $400 for the interest.
Your Application For A Bid Bond Could Be Rejected
There is a possibility that your bid bond request will be refused by the surety company since it will depend upon the information that they can get from the background check. If the surety company thinks that it will be a risk to give you a Surety Bid Bond, they will deny your application. Your credit history is one of the most important factors to be approved for a bid bond because if you have a bad credit history, it will likely be hard to get a Surety Bid Bond.
You can get a bid bond even if you have a bad credit score, but it’s possible you might have to pay an interest rate upwards of 10 to 20 percent.
If you plan to get a Surety Bid Bond, make certain you understand what it may entail prior to deciding. It is not easy to apply for, but if you know more about this, it will be a little bit easier to be approved.