What is a Bid Bond in Michigan?
A bid bond is one of the types of surety bonds, that guarantees that the bidder will enter into the contract and complete it according to its terms. The bid bond provides assurance to the project owner that the bidder has the ability and ability to finish the job once you are selected after winning the bidding process. The basic reason is that you need one to get the contract. However, the bigger question is why are more owners/developers requiring a surety bid bond? The simple answer is risk. Given the uncertainty of the marketplace, which includes long-time contractors going out of business, to municipalities filing bankruptcy (or just slow paying), has led to owners being afraid that their contractors will be unable to complete the job. Thus, they require a some protection.
Just fill out our bond application here and email it to [email protected] - click here to get our Michigan Bid Bond Application
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 Michigan?
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 P&P bond if you get the job. The cost of a bid bond 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 on the contract.
How much do bonds cost in MI?
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 Michigan. 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 Michigan?
We make it easy to get a contract bid bond. Just click here to get our Michigan Bid Bond Application. Fill it out and then email it and the Michigan bid specs/contract documents to [email protected] or fax to 855-433-4192.
You can also call us at (913) 286-6501. We review all application for bid and P&P bonds and then submit it to the surety that we believe will provide the best bid bond for your company. We have a great success rate in getting our clients surety bid bonds at the very best rates possible.
What is a Michigan Bid Bond?
A bid bond is a bond that guarantees that you will accept the work if you win the contract. The bid fee (usually 5% or 10%) is a damages calculation 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 payment and performance 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. This is risk security for the owner of the project.
Who Gets the Surety Bid Bond?
The general contractor is the entity that gets 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 Minnesota Bid Bond page here.
More on Surety Bid Bonds https://swiftbonds.com/bid-bond/.
Learning More About Applying and Finding The Right Bid Bonds For Your Needs
Bid Bonds can be complicated to apply for, 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 consider 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 provide you information on the importance of Bid Bonds and how they actually work.
The Importance Of A Surety Bid Bond
Bid Bonds will always be in demand to protect the public because it is a kind of assurance that your obligations and duties will be completed. 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 will depend upon your situation.
The Primary Purpose 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 that makes them think you will be a risk.
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 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 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 shows a risk of default on the bond.
You CAN get a bid bond even if you have a bad credit score, but most likely you will pay an interest rate upwards of 10 to 20 percent.
If you plan to get a Surety Bid Bond, make certain you understand what is required prior to deciding. It is not easy to apply for, but if you know more about them, it will be a little bit easier to be approved.