As a business owner, you need a surety bond to protect your best interests. Therefore, you have to choose the right bonding company to make sure you are protected. When choosing from the many bonding companies around, see to it that you exercise common sense when evaluating the companies according to their track records, reputation, and bonding processes.
A surety bond is usually used in the construction industry. It is a three-way agreement between the owner, the contractor, and the surety company. It ensures the owner that the project will be completed by the contractor. With this type of performance bond, the owner is protected in case of contractor default.
Surety bond companies are considered part of the insurance industry. The main role of these companies is to guarantee the commitment of the contractor to follow a contract. Some surety companies though may charge a premium for backing a contractor.
The risk associated with underwriting a contractor leads these companies to do extensive research on contractors they hold bond with. You can expect these surety companies to ask for references from the contractor as to their experience in completing a contract. Aside from this, surety companies will also investigate if the contractor has the necessary workforce and equipment to carry out the completion of the project. Other factors to be considered by surety companies include bank relationships, credit history, and current lines of credit.
Before you work with a surety bond company, ask around your neighborhood regarding the surety companies other businessmen recommend. Once you have a list of names, do your own research and find out about the kind of contractors they bond with. Also ensure that the bonding company is licensed for bonding by checking the US Treasury Department. You can also ask the company about the bonding process they use for their contractors. This way you can see if they are very strict about whom they bond with.
Lastly, see to it that your communication lines are open with the surety bond company so they can properly underwrite the contractor and get you fully protected from any liabilities.